Wal-Mart CEO sees 'stress' in the economy
Shares of Wal-Mart Stores Inc. (WMT) are trading down today after Chief Executive Mike Duke told NBC's "Today" show that he sees "a lot of stress" in the economy and that the recession will not end quickly.
The comments are hardly a surprise. Same-store sales at the world's largest retailer unexpectedly fell in March and economists were surprised by the 1.1 percent decline in U.S. retail sales. Consumer confidence remains at a record low, according to ABC News. Unemployment has hit double-digits in hard-hit states such as Michigan.
But many investors thought that Wal-Mart would be able to withstand the turmoil of the economy. After all, consumers would "trade down" from pricier chains to take advantage of the company rock-bottom prices. That notion has some validity. Wal-Mart did manage to eek out a 1.4 percent gain in March same-store sales at a time when many rivals, including Target Corp. (TGT) and Costco Wholesale Corp. (COST), posted declines.
The economy may be showing some signs of improvement, but there are plenty of worrisome trends.For instance, manufacturing output fell at an annual rate of 22.4 percent in March, the largest quarterly decline in 34 years. Federal Reserve Bank of Dallas President Richard Fisher is particularly pessimistic and expects the U.S. jobless rate to rise from 8.5 percent to more than 10 percent.
"The economic data in the U.S. is quite grim, and I expect a contraction at an equally dismal rate in the first quarter," Fisher said in a speech in Hong Kong today.Wal-Mart is proving to be mortal after all.