Wal-Mart Still Reigning through the Storm? September 1st, 2009
In January we reported that despite the grim status of the economy, Wal-Mart held its own and continued its legacy of making money regardless of its peer’s losses. Analysts suspected that Wal-Mart was actually benefitting from the weak economy because many consumers were being forced to trade down. But come nine months later, is the empire superstore beginning to feel some of the recession’s daunting repercussions?
The answer: yes and no.
The current state of the economy has led consumers to shop less and therefore spend less. According to an article on MarketWatch.com, consumer sentiment has dropped another 1% this past quarter. Given the current state of the economy and the common struggles that many American’s are facing, this is hardly unbelievable. The causal factors for this drop in consumerism are not only job losses and falling house prices, but also weak income growth, rising energy prices and too much debt.
Though it had been dodging this dilemma in prior quarters, Wal-Mart has now joined many other retailers with a drop of about 1.2% in sales this month. While a plunge in sales could have the potential to cause much damage to the major retailer, Wal-Mart took measures to ensure a way to end the month with a profit.
According to an article in the Wall Street Journal, the wholesale giant found a way to offset their losses in sales by cutting expenses in inventory and negotiating costs from their suppliers. As a result, the superstore ended the quarter in profit despite a dive in sales. Wal-Mart is a prime example of a company that is taking necessary precautions to stay afloat through this rocky point in time.
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