Strapped consumers. A strong dollar. An incomplete turnaround plan.
OK, these factors are probably part of the reason Walmart (WMT) is underperforming on sales and profit both, with the stock down about 3% on the latest, disappointing earnings news.
But Walmart faces a bigger problem that shareholders and company executives may not have come to terms with yet: American shoppers don’t really want what Walmart sells any more. “People no longer waste money just to show the stuff they have,” says Sarah Quinlan of Mastercard Advisors. “We’d rather have an experience. This is how we will continue to spend going forward.”
Walmart remains a prodigious retailer, with nearly $500 billion in annual sales, making it America’s biggest company. It’s certainly not going away. But growth is painfully slow and could very well stay that way. Same-store sales in the U.S. grew just 1.1% compared with 2014, which is less than inflation and income growth during the same period of time (both were around 2%).
This weak performance comes at a time when consumers are gaining purchasing power and ought to be spending more. Median household income is still lower than it was a decade ago, but it’s been improving lately. And other trends are making shoppers more optimistic. Gas prices are about $1 per gallon lower than they were a year ago, freeing roughly $1,000 a year for the typical household. U.S. employers have created nearly 3 million new jobs during the last 12 months, enhancing job security. If Walmart can only boost sales 1% during a consumer boom, imagine how it’s likely to weather the next recession.
Walmart isn’t the only underperforming retailer. Macy’s (M), Kohl’s (KSS) and J.C. Penney (JCP) all reported sales below expectations recently. Retail sales are up a scant 1.9% so far in 2015, compared with last year. Real growth in retail sales, after accounting for inflation, is effectively 0.
Demographic and economic trends, meanwhile, are working against Walmart. More people are moving from suburbs to cities, giving up the basements and spare bedrooms where they used to stash bulk purchases from a superstore. Baby boomers, who essentially made Walmart, will soon be downsizing their homes as they streamline for retirement. Household formation among the next generation of home owners remains weak, as young people grapple with student debt and put off big spending decisions.
Walmart has a logical plan to improve its numbers: improve the quality of its stores, sell more groceries and local offerings, and compete more aggressively against online giant Amazon (AMZN). But most of those initiatives rely on consumers spending more for the same kind of merchandise they bought in the past. Don’t be surprised if consumers spend on something else.
Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.
http://finance.yahoo.com/news/this-is-the-real-reason-walmart-is-struggling-143624443.html
Walmart can go suck on a turd. Damn near the worst thing ever devised for the capitalistic economy, if every Walmart spontaneously combusted, I would applaud! Once in a while, my children will drag me into Wallyworld. I can’t stand walking into Walmart and seeing these exploited greeters telling you to “have a nice day.” I guy damned near can’t hold back from telling them to “F*@k Off” but these people don’t know any better. So they show up every morning for the daily Walmart cheerleading bullshit all employees are brainwashed with. The Walton Family, there’s a special place in hell they’ve bought and paid for.
capitalism vs. free market. walmart put many out of business. i hope it fails
““People no longer waste money just to show the stuff they have,” says Sarah Quinlan of Mastercard Advisors. “We’d rather have an experience. This is how we will continue to spend going forward.””
ROLMFAO!!! Really? So that’s the reason why no one is spending anymore in stores? Not because people have no jobs and no money and no life and the fact that over half of the American people are unemployed?
Their excuses keep getting more and more unfrigginbelievable….
But of course, what do you expect from YAHOO?
That’s what I was thinking, NC. This article was written to explain Walmart’s decline with any excuse other than a crashing economy.
Lie #1: “More people are moving from suburbs to cities,..”
Lie #2: “But they’re spending more on air travel, hotels, restaurants, jewelry and furniture.”
Lie #3: “consumers are gaining purchasing power and ought to be spending more”
I’ll stop there or I might be here all night.
That’s what caught my eye, JR…
“This weak performance comes at a time when consumers are gaining purchasing power and ought to be spending more.”
Straight up jew advice, obviously.
Why buy food at Walmart when you can go to HEB and get organic?
Why buy other stuff at Walmart when you can buy more in bulk at Sams?
Why buy electronics at Walmart when half the electronics they sell are NOT compatible with what you have already? (Try buying DVD-RWs at Walmart for your Magnavox DVD player…you can’t probably)
Why buy potted plants at Walmart when half of them are dried up because no one waters them? (Maybe they give them Brawndo there…it’s what plants crave…)