4 Telling CEO Quotes on the Economy

Investing is sometimes like an open-book test. All you have to do is read and listen. When you listen, make sure you pay special attention to the CEOs. This is a prime example.

Jul 20, 2014 at 10:08AM
Wmt

walmart.com

Below are four quotes from the CEOs of Wal-Mart U.S. (NYSE:WMT), Family Dollar (NYSE:FDO), Dollar Tree (NASDAQ:DLTR), and Dollar General (NYSE:DG). Two of these quotes might frighten you, and the other two might make you feel a little greedy. 

Misinterpretation
Most people, and many investors, think that a slowing US economy is good for Wal-Mart's domestic operations. This used to make sense because more consumers would look for low-priced merchandise when times were tough. However, now that the US government has slowed down its assistance for low-income consumers (at least 20% of Wal-Mart's shoppers), Wal-Mart is no longer a lock for increased traffic and sales when the economy is struggling. That might sound bad, and the following quote might make it sound worse, but there's more to the story. First, read the quote that Wal-Mart U.S. CEO Bill Simon gave to Reuters:

People think we do better in a down economy; we don't. We do better when the GDP is growing, and we really need that in the long run for our business to improve.

Sounds pretty gloomy. However, he went on to say that Wal-Mart's US business isn't getting any better, but that's it's also not getting any worse for the middle class and down. If that's the case, then it's likely that Wal-Mart will continue to show low-to-modest revenue and net income gains over the next several years.

On the top line, Neighborhood Market (46 consecutive quarters of comps growth) should play an increasingly important role, as should e-commerce (sales increased 27% in the first quarter year over year). On the bottom line, Wal-Mart has the ability to improve by closing underperforming Sam's Club and supercenter locations.

While the business changes, Wal-Mart should continue to reward its shareholders via share buybacks and dividend payments. Investors shouldn't see this as a big win, but it's a win, nonetheless.

More concerning
Howard Levine, Family Dollar's Chairman and CEO, recently stated:

Our results continue to reflect the economic challenges facing our core customer and an intense competitive environment. We are pleased that our comparable store sales for the third quarter in all of our merchandise categories improved relative to our second quarter results. Although our sales remain below our expectations, we are encouraged by the improving trends.

That might sound optimistic, but always be wary of CEOs finding positive comparisons in negative news. If you're wondering about that negative news, it pertains to the third quarter.

Net income declined to $81.1 million from $120 million in the year-ago quarter, and comps declined 1.8% on fewer transactions. This indicates a lack of efficiency and declining demand. Though they weren't terrible numbers, the CEOs of Family Dollar's peers released very different types of statements.

A still-growing tree
Dollar Tree's first-quarter revenue increased 7.2% year over year, earnings per share improved to $0.67 from $0.59, and comps improved 2%.

These numbers might not be substantial, but they're impressive in a difficult consumer environment. This relates to CEO Bos Sasser's recent comment:

Our first quarter grew as the result of increases in both traffic and average ticket with our discretionary business growing slightly faster than consumables.

Additionally, Dollar Tree expects full-year comps growth in the low-to-mid single digits, which isn't easy in today's consumer environment.

The General has spoken
With intense competition, severe winter weather, and a hesitant consumer, it's very difficult for a retailer to deliver on sales, comps, and net income, but Dollar General has managed to pull it off.

In the company's first quarter, sales increased 6.8%, comps improved 1.5%, and net income came in at $222 million versus $220 million in the year-ago quarter.

Rick Dreilng, CEO of Dollar General, recently stated:

We continue to grow our customer traffic and average transaction amount as our merchandising initiatives reinforce our affordability and value messaging.

For the fiscal year, Dollar General expects sales to increase 8%-9% and comps growth at a 3%-4% clip. Rick Dreiling will retire next year, which leads to some question marks, but the company has established an effective business model. 

The bottom line
Dollar Tree and Dollar General are still doing well. A hesitant consumer is a concern, but the bigger concern should be the expansion of Wal-Mart's small-box stores (Neighborhood Market and Walmart Express). For now, however, all is well. Speaking of Wal-Mart, you won't see the same type of top-line growth potential of Dollar Tree and Dollar General in the near future, but Wal-Mart has more levers to pull to increase its profits. This is good news for investors.

How to get even more income during retirement
Social Security plays a key role in your financial security, but it’s not the only way to boost your retirement income. In our brand-new free report, our retirement experts give their insight on a simple strategy to take advantage of a little-known IRS rule that can help ensure a more comfortable retirement for you and your family. Click here to get your copy today.

 

Dan Moskowitz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers