Wal-Mart Puzzle: Why Is It Thriving?
According to Daniel Gross at Slate.com, Wal-Mart’s stock is at a 2-year high (see chart above) because:
1. Wal-Mart sells necessities, not discretionary items. The overwhelming majority of its sales are not impulse buys. Even in a recession, most people don’t drastically reduce their spending on staple groceries, light bulbs, or diapers.
2. In a pinched economy, consumers are embracing their inner skinflint. And Wal-Mart is a penny pincher’s paradise.
3. The economic-stimulus package President Bush signed earlier this month seems to have been designed to help Wal-Mart. It funnels cash to individuals making less than $75,000 or to families making less than $150,000, many of whom might shop at Wal-Mart. $300 really isn’t enough to put a dent in a payment for a new car or to pay off a mortgage, but it might be enough to spur a shopper to throw a few extra goodies into the Wal-Mart shopping cart.
4. As the U.S. economy idles, the rest of the world is still growing quite rapidly. And Wal-Mart finally has meaningful international sales to report. In 2003, international sales were just 16.7% of overall revenues. But thanks to aggressive expansion in Mexico, China, and elsewhere, Wal-Mart has become an increasingly multinational corporation. In the 12 months that ended in January 2008, international sales rose 17.5% and constituted 24.2% of overall sales.
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Tags: 12 Months, Aggressive Expansion, Daniel Gross, Diapers, Economic Stimulus Package, Funnels, Goodies, Groceries, Light Bulbs, Multinational Corporation, Necessities, Overwhelming Majority, Penny Pincher, President Bush, Recession, Rest Of The World, Shopping Cart, Skinflint, Slate, Wal Mart