According to Yahoo! Finance, the largest retailer in the world reported a 22% increase in its fourth quarter profit, citing cost cutting and inventory reduction as the main drivers in bottom-line success. However, this only paints a portion of the picture. Although total sales rose nearly 5% to 113.6 billion, same-store sales, which is often a more important measure of customer sentiment, fell 1.6%.
Current CEO, Mike Duke, who’s now entering his second year at the helm, said in a statement that he expects continued strong growth in international markets, but struggles at home in the United States. Unfortunately, many business leaders are echoing similar beliefs: Emerging markets continue to emerge while the United States remains tempered by sluggish economic prospects.
Looking deeper into the results, it becomes clear that top-line declines can be attributed to lower prices across the board, specifically in groceries and electronics. Industry experts are saying that this deflation has had to occur because people who typically shop at Wal-Mart may still be facing dire economic conditions and won’t shop if they believe they are paying more for goods than in previous years.
Although Wal-Mart is trading down today, this may be a good sign for the broader economy. It may be true that people who were shopping at Wal-Mart throughout 2008 and 2009 have decided to shop at higher end retailers and smaller grocery stores. After listening to CNBC this morning (February 18, 2010), Darden Restaurant CEO seemed positive about the prospects of his restaurant’s target customer, who according to his beliefs, make anywhere from 50,000 to 80,000 dollars per year. So, while Wal-Mart may be suffering slightly, there is potential for a broader economic recovery as well.
BY GROUP 8: Alex Harris, Brandon Lebowitz, Kevin Ondyak
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