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August 16, 2011 1:05 pm
Walmart warns on US weakness
By Alan Rappeport in New York

Walmart, the biggest US retailer by revenues, warned on Tuesday that persistent weakness in the US economy was putting pressure on its low income consumers who are increasingly worried about unemployment and becoming more reliant on government assistance.

The struggling US economy is continuing to take its toll on Walmart’s domestic sales as it reported its ninth consecutive quarter of falling sales at US stores open at least a year. Comparable store sales at Walmart in the US, excluding fuel sales and purchases at Sam’s Club stores, were down by 0.9 per cent from a year ago.

“We remain concerned about the economic pressure on our customers and the uncertain impact it can have on their shopping behaviour,” Bill Simon, chief executive of Walmart’s US business, said. “With this volatility, it is as important as ever to deliver on Walmart’s one-stop shopping promise for broad assortment and every day low prices.”

Walmart, regarded as a bellwether for the US economy, has been trying to improve its domestic performance after more than two years of stagnant same-store sales. Once revered for its “everyday low prices”, dollar stores and Amazon.com have been eating into Walmart’s market share and convincing consumers that they offer better bargains.

In spite of that disappointing stretch, analysts were heartened by signs that sales could soon turn around, as Walmart looks to reassert itself as the retailer with the lowest prices. Shares of Walmart rose 3.64 per cent to $51.80 in mid-morning trading, as its results exceeded analysts’ expectations.

Theoretically this is a period when Walmart should be thriving,” said Brian Sozzi, retail analyst at Wall Street Strategies. “They have signalled that in the back half of the year they are poised to do well again.”

The company has been working to correct changes it made to its stores and inventory that proved to be unpopular and to branch out with smaller “express” stores that fit better in urban areas. Charles Holley, chief financial officer, said that comparable store sales have been improving in each of the past three months and said they would rise by the end of the year.

However, Mr Holley said that joblessness has surpassed high petrol prices as the top concern of its shoppers and that more of its customers are spending with food stamps and unemployment insurance money.Walmart has been offering products in smaller packages to accommodate shoppers requiring lower prices.

“They are living paycheck to paycheck,” Mr Holley said. “How long can the nation go forward with such a high unemployment rate?”

http://www.ft.com/cms/s/0/9c57...0.html#axzz1XgvVDZOD

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But business is good at the various "dollar stores."  Maybe Walmart is losing some of its customers to dollar stores, where you can park and get to the store without walking a long way or risking your life in a busy parking lot where all too many people drive like they are possessed. Maybe folks would rather drive a couple of blocks to their neighborhood dollar store rather than burn fuel making an 8, 10, or 12-mile round trip to Walmart. Check this out:

 

http://www.dailyfinance.com/20...row-forecast-raised/

 

http://stocks.investopedia.com...2.aspx#axzz1Xh04mQmv

 

http://money.howstuffworks.com...ng/dollar-store1.htm

 

From the third link:

 

"During an economic downturn, however, thriftiness becomes more appealing and sensible. Dollar stores' coffers are replenished as consumers start searching for cheaper items.

In fall 2008, as the economies of many nations worldwide were tanking, shareholders and executives of dollar stores had cause to rejoice. The highest-performing stock of 2008 among the Standard and Poor's 500 stock index was Family Dollar (FDO), which rose in value 42 percent while the index as a whole declined 37 percent [source: USA Today]. That means that a dollar store chain bested S&P 500 companies with names like Apple, JPMorgan Chase and FedEx."

Yep.  I mentioned in the Wal-Mart Layaway thread the other day that their current problems have been brewing for several years.   When you keep expanding stores your shareholders don't mind a smaller gross margin as that money is typically used for that.  Now that they have basically expanded to everywhere they possibly can the margin has to go up.  this means raising prices. 

 

http://adage.com/article/news/...cious-circle/229401/

 

highlights of the article:

- 60% to 86% of walmart shoppers don't believe they have the lowest prices anymore

- Their competitors are now using loyalty programs to keep their most profitable customers from shopping elsewhere, and with those programs they often beat Wal-Mart's price

- Their competitors aren't seeing the same problems.  Target, dollar stores, drug stores and even Sam's Club's are doing better.

- Size may have something to do with it.  The Neighborhood Market concept stores sales are up.

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