Wal-Mart sales revenue clouds U.S. economic recovery predictions

The front entrance of a Wal-Mart

The Wal-Mart sales report is a leading economic indicator and a decline in revenue has analysts predicting that a consumer-driven U.S. economic recovery may not be sustainable. Flickr photo.

Because of Wal-Mart’s sheer volume and scope, economic analysts pay close attention to Wal-Mart sales revenues. Wal-Mart sales revenues are a leading indicator of consumer spending and the overall health of the economy. Recent sales reports for some of the nation’s biggest retailers have met or exceeded expectations. An April jobs report shows more hours, more pay and more hiring. Wal-Mart’s sales revenues are down, while Target’s sales revenues are up. But officials from both companies are saying that the consumer comeback many hope will drive the U.S. economic recovery from the Great Recession may not be sustainable.

Wal-Mart sales report

Wal-Mart, the world’s largest retailer, averages more than 100 million shoppers every week. Shoppers spending their extra cash generate more than $400 billion in annual sales. CNNMoney.com reports the Wal-Mart sales report shows revenues worldwide rose 6 percent to $99.1 billion, which beat analysts’ forecasts of $98.45 billion. However, sales at Wal-Mart stores open at least a year — a key metric of retail performance called same-store sales — fell 1.4 percent in the three months ending April 30. Same-store sales rose 3.6 percent in the same period a year ago. The first-quarter drop follows a 1.6 percent decline in same-store sales during Wal-Mart’s fourth quarter.

Wal-Mart sales revenues 2010

Wal-Mart’s sales report logs the company’s fourth consecutive quarter of dragging U.S. sales. The Wall Street Journal reports that Wal-Mart predicted that its U.S. sales would continue to be sluggish this summer as the working-class customers who form Wal-Mart’s base still reel from the effects of the recession on their personal finances. Unemployment and rising gas prices heading into the summer further cloud the Wal-Mart customer’s outlook.

Target sales revenues

Wal-Mart sales revenues and their contrast to Target sales revenues say something about the U.S. economic recovery in 2010. Target, an emerging rival to Wal-Mart’s demographic, reported a 29 percent increase in first-quarter net income. The Associated Press reports that Target’s rising sales revenues are a sign that the retail chain is drawing customers away from competitors such as Wal-Mart. However, during a conference call to investors, Target Chairman and CEO Gregg Steinhafel said “Clearly, the economy and consumer sentiment have improved since the weakest point in 2009, but we believe that both are still somewhat unstable and fragile and will likely continue to experience occasional setbacks as the year progresses amid a stubbornly high jobless rate.”

U.S. economic recovery 2010

Target, which has managed to brand itself as a Wal-Mart-type discounter with a little bit of style thrown in, took a hit during the Great Recession. Wal-Mart’s sales and profits rose during the recession as cash-strapped Americans left supermarkets and department stores in search of bargains. But as the economy gets better, Wal-Mart appears to be losing the new customers it won during the downturn. Based on sales figures, many of those customers have taken a baby step up to Target.

U.S. economic recovery predictions

Wal-Mart’s U.S. demographic will have to pull out their wallets for the U.S economic recovery to be sustainable. The CNNMoney.com article notes that retail sales expanded over the last seven months because 40 percent of current spending comes from 20 percent of the highest incomes. Plus, because of events like the stock market Flash Crash and European debt crisis, the rate of the retail sales increases fueled by the more affluent households has slowed since March.

Long, strange U.S. economic recovery

Wal-Mart’s customer base is going to need more work and more money for them to shore up the sputtering economic recovery. The U.S. unemployment rate stuck at nearly 10 percent, the underemployment rate is increasing, wages decline for people who can find work and inflation-adjusted income is flat. At the current rate of economic growth it will take more than three years to bring the unemployment rate below 6.3 percent, where it was at the peak of the 2001 recession.

U.S. economic recovery headwinds

Wal-Mart’s troubles, the retail sector’s outlook and the health of the economy at large are facing what Sandra Pianalto, the president of the Federal Reserve Bank of Cleveland, calls a “powerful headwind.” As reported in The Washington Independent, Pianalto said a heightened sense of caution is driven by deep uncertainty that the standard of living Americans had become accustomed to will return. People who began their working careers in the mid-1980s had experienced consistent prosperity broken by two very brief downturns. Now expectations have shifted as a result of this long and deep recession.

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