Seeking Alpha

Is Wal-Mart next? The next big retailer to report a margin shock (previous) due to discounting...

Is Wal-Mart next? The next big retailer to report a margin shock (previous) due to discounting could be Wal-Mart (WMT +0.5%), according to analysts. WMT exec Duncan MacNaughton concedes as much, saying "we continue to invest in price to drive our price separation and our price leadership." Thomson Reuters estimates WMT's gross margin will fall to 24.5% from 25.1% this quarter - a mark that could move lower if WMT keeps discounting right through the end of the year.
Comments (5)
  • wyostocks
    , contributor
    Comments (8868) | Send Message
    Lower margin on an incremental sales dollar is better than zero margin on no sales dollar.
    Seems like this is an industry wide problem.
    14 Dec 2011, 02:06 PM Reply Like
  • Stoploss
    , contributor
    Comments (1727) | Send Message
    All of the christmas stuff is already 50% off in a lot of stores i have been into. Were still ten days out. Now they're putting out spring inventory to liquidate, er," put on sale", after the first of the year.


    Now would be a good shorting op for retailers, since we are obviously turning demand inside out, instead of simply pulling demand forward.
    Now were into the margins, the last stand.


    Guess what the retailers will have to do to stave off margin collapse? Two words:
    14 Dec 2011, 02:12 PM Reply Like
  • OptionManiac
    , contributor
    Comments (3381) | Send Message
    CEO salaries at WMT is over 500 times peons working in the stores. Since the peons are at minimum wage (or slightly above) I see only one way to widen those margins.
    14 Dec 2011, 02:21 PM Reply Like
  • Stoploss
    , contributor
    Comments (1727) | Send Message
    The only way to slow the margin collapse is to raise prices.


    They are going to have to raise prices at the onset of another recession.


    I would rather juggle three loaded double barrell shotguns, than have to raise prices right now, if i was a retailer.
    14 Dec 2011, 02:35 PM Reply Like
  • Inzaghi009
    , contributor
    Comments (29) | Send Message
    This is what I had envisioned would happen to signal another recession looming nearby..
    14 Dec 2011, 02:48 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs