Sales at Wal-Mart mixed

Good morning everyone!

There is a slew of news this morning worth writing about.  First up is Wal-Mart which reported its second quarter earnings this morning.  In short, profits at the world’s largest retailer were up 3.6%.  However, U.S. same-store sales were down for the fifth consecutive quarter.  Same-store sales compares each store’s current quarter results to the year before.  This number tries to strip out the distortions caused by new store openings.  While Wal-Mart’s overseas sales were up to an exciting degree, I am more focused on the U.S. aspects of their business as a window into the mind of the all-important U.S. consumer.

Analysis: That Wal-Mart continues to struggle as a low-cost retailer is significant.  Many U.S. consumers rely upon the big retailer for their staples purchases.  So for same-store sales at Wal-Mart to be down so consistently is evidence of the “hunker down in the bunker” mentality of the average U.S. citizen.

Something to file away in the back of your mind…

Interestingly, luxury goods manufacturers are seeing a slight rebound in their sales over the last several months.  This suggests that the wealthier among us are more optimistic about, or at least less affected by, the current state of the economy.  It is sometimes the case that the wealthy serve as a leading indicator of economic health.

It’s like this, with their jobs, careers, businesses or investments comfortably intact, the wealthy will start spending discretionary income on goods before other consumers.  The positions of power that the wealthy occupy, combined with a sense of stability in those positions, means that they are also more open to other types of spending.  An example, would be them increasing hiring at their businesses.  So it may be the case that we are seeing the beginnings of renewed stability in the U.S. consumer.

Importance grade: 5; Wal-Mart has long been a dominant retailer in the U.S. of low-end staples.  They remain exactly that.  However, because they are so dominant it is difficult for me not to feel that their sales have peaked as other retailers nip away at Wal-Mart’s heels.  Assuming that’s true, Wal-Mart’s sales will become a less important indicator of the mind of the U.S. consumer.

Jason