The Walmart Economy

May 13, 2008 at 11:48 am  ·  Category: Macro Economics, Market Commentary, Stocks

Our business is even more relevant to our customers today, given the current economic pressures.

Lee Scott, CEO Walmart

This is the Walmart Economy!  I’ve been talking about this for a bit now (see, for example, “Dan Gross: Tough Economy Is Walmart’s Sweet Spot”, Top Gun FP, February 27, 2008).

Before the open this morning, Walmart (WMT) reported another strong quarter: revenues up 10%, same store sales up 3%, net income up 7% (WMT Earnings Release).

During the boom, Target (TGT) was kicking Walmart’s butt (see, for example, “Walmart Era Wanes Amid Big Shifts In Retail” (subscription required), The Wall Street Journal, October 3, 2007, A1).  But as consumers have become pinched by declining home prices, rising gas prices and an increasingly difficult job market, things appear to have shifted for Walmart vis a vis Target (Target And Walmart Same Store Sales Chart).  And investors have caught on (WMT vs. Target Stock Chart).

It will be very interesting to see what Target’s numbers look like when they report earnings next Tuesday.  We already know their same store sales have been week (Feb: +0.5%, March/April: -1.3%).

For me, this strongly supports the contention that the consumer is struggling and it is effecting their spending behavior.

Disclosure: Top Gun is long Walmart (WMT) and has no position in Target (TGT).

Posted by Greg Feirman  ·  Trackback URL  ·  Link
 

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