Tuesday, February 19, 2013

Walmart 'freaking out' about the economy

Posted By on Tue, Feb 19, 2013 at 11:49 AM

From The Washington Post's Wonkblog:

“Well, we just had one of those weeks here at Walmart U.S. Where are all the customers? And where’s their money?”

Not doing so well. (The Washington Post)

On Friday, Bloomberg published a couple of internal e-mails from Wal-Mart executives panicking about the company’s worst sales start in seven years — “a total disaster,” as one put it. The execs attributed Wal-Mart’s slump to the payroll tax hike that kicked in on Jan. 1, cutting the median family’s take-home pay by about $1,000 this year.
So if Wal-Mart is struggling, does that mean everyone else should worry? There are two ways to look at this. The first is that this is a terrible omen. Wal-Mart makes up such a huge chunk of the U.S. economy — 2.3 percent of GDP in 2006 — that many analysts look to it as a key bellwether.

On the other hand, maybe Walmart's troubles are about competition, not the economy.

The theory here is that Wal-Mart is an “inferior good” — when times are tough and incomes are falling, consumers switch to shopping at the cheaper retail giant.

The flip side of that: When the economy rebounds, Wal-Mart’s higher-priced rivals do better. As it happens, Target’s sales rose 3.1 percent in January, part of an overall uptick in merchandise and department store shopping. So it’s very possible that Wal-Mart’s woes are just specific to the company — and not part of a broader trend.

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