Why Wal-Mart and McDonald's Will Lag the Market

Consumer spending rose a seasonally adjusted 0.5% last month, the fastest pace since June and another sign that Americans are opening their wallets this holiday season. The positive news has the Dow Jones Industrial Average (DJINDICES: ^DJI  ) rising 0.48% today with broad gains throughout the index.  

Spending rose slightly faster than a 0.2% rise in incomes, so the confidence of consumers may be rising a little faster than the actual money they have to spend. That is supported by a University of Michigan/Thomson Reuters consumer sentiment index reading of 82.5, which is the highest level we've seen since July.

Two companies that you would think would welcome this news are Wal-Mart (NYSE: WMT  ) and McDonald's (NYSE: MCD  ) , but the big-box retailer's stock is only up slightly while the Golden Arches are declining today. While these two companies were stars when the economy was getting worse, they're not seeing the same benefits as others as it improves.

Wal-Mart is already seeing same-store sales decline in the U.S, underperforming Target and Costco in that respect. Worse yet, Amazon.com is now as big as Target from a revenue standpoint, and as the online retailer grows it's taking a disproportionate amount of sales from Wal-Mart. Price-sensitive consumers who used to flock to Wal-Mart are now going online, which hurts the company's prospects long term.

The trends are also going against McDonald's, which was a low-price alternative when incomes were falling but is seen as cheap and unhealthy by many consumers today. Instead, consumers with growing incomes are going to fast-casual concepts like Chipotle and Panera Bread, which are growing much more quickly than McDonald's.

The growth in consumer spending should be a positive for Wal-Mart and McDonald's, but market trends may take away some of their upside. I think that's why these stocks are underperforming today and will continue to do so into the future. 

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