A Wal-Mart Economy?

Our business is even more relevant to our customers today, given the current economic pressures.

- Lee Scott, CEO Wal-Mart

This is the Wal-Mart Economy! I’ve been talking about this for a bit now (see, for example, “Dan Gross: Tough Economy Is Wal-Mart’s Sweet Spot,” Top Gun FP, February 27, 2008).

Before Tuesday's open, Wal-Mart (WMT) reported another strong quarter: revenues up 10%, same store sales up 3%, net income up 7%.

During the boom, Target (TGT) was kicking Wal-Mart’s butt (see, for example, “Wal-Mart Era Wanes Amid Big Shifts In Retail” (subscription required), The Wall Street Journal, October 3, 2007, A1). But as consumers have become pinched by declining home prices, rising gas prices and an increasingly difficult job market, things appear to have shifted for Wal-Mart vis a vis Target (Target And Wal-Mart Same Store Sales Chart (pdf file)). And investors have caught on (WMT vs. Target Stock Chart (pdf file)).

It will be very interesting to see what Target’s numbers look like when they report earnings next Tuesday. We already know that its same store sales have been week (Feb: +0.5%, March/April: -1.3%).

For me, this strongly supports the contention that the consumer is struggling and it is affecting their spending behavior.

Disclosure: Top Gun is long Wal-Mart (WMT) and has no position in Target (TGT).

Comments

[seeksome]

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