Walmart's Stock Surge Reflects Hard Times for the Cash-Strapped

Walmart
Walmart

Walmart's (WMT) recent stock surge might be a good sign for the nation's biggest discounter, but it also highlights the economic fragility of America's low- and moderate-income consumers, its core shoppers.

On July 27, shares of the world's biggest retailer soared to a record high of $74.80.

Walmart's numbers are considered bellwethers for the retail industry. But on the other side of the equation, when Walmart sees its earnings improving, the theory goes, it's often because times are tougher for the nation's financially strapped.

Walmart's stock surge followed the retailer's healthy first-quarter earnings report. For the most recent quarter, which ended in April, the discounter posted its biggest comparable-store sales gains in three years.

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Meanwhile, poverty in America is poised to reach its highest level since 1965, the Associated Press reports. The poverty rate is expected to reach 15.7%, up from 15.1% in 2010, according to a survey of economists, think tanks and academics.

Walmart has stepped up its pursuit of these very consumers -- many of whom have been flocking instead to dollar stores -- by lowering its prices further this year.

In March, Walmart detailed a $2 billion plan to "reinvest" in low prices, expressly in areas such as food and consumables, to drive more traffic to its 3,868 U.S. stores.

"We're investing in price leadership and giving savings to our customers," Mike Duke, CEO, told investors at Walmart's shareholders meeting last month.

Seems they're going to need it.

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