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Store Sales Slip, And Wal-mart’s Profit Is Flat

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http://www.nytimes.com/2009/08/14/business...mp;ref=business

Retail sales fell unexpectedly in July, the government reported on Thursday, chilling hopes that consumers are ready to lead the American economy out of recession.

The Commerce Department reported that retail sales fell by a seasonally adjusted 0.1 percent from June, and were 8.3 percent lower than a year ago.

Economists, who had been expecting an increase of 0.7 percent, called the numbers a sobering reminder of the persistent weakness in consumer spending, which has made up 70 percent of the United States economy in recent years.

“This is only a little piece of what is a huge seismic shift — a return to savings by American consumers and a shift away from spending,†said Allen Sinai, president of Decision Economics. “Without the consumer, the economy will not have any kind of a typical recovery, and will grow very, very slowly for a long time.â€

One bright spot in the report was automobile sales.

Consumers spent 2.4 percent more on motor vehicles and automotive parts last month compared with June as the government’s popular “cash for clunkers†car-purchase program got under way, but any money that flowed into the pockets of car dealers seemed to come at the expense of other businesses.

Retail spending excluding sales of cars and car parts fell 0.6 percent.

People spent less on furniture, electronics, appliances, books and music, implying that American consumers are still wary of the weak job market and an uncertain economic recovery.

Consumer spending fell by an annual rate of 1.2 percent in the second quarter, dragging down the country’s overall economic output.

Some 20 months into the recession, millions of consumers are still saving more money as they try to shore up their depleted finances and make up some of the wealth they have lost as their home values declined and their stock portfolios dwindled. Economists say high unemployment and stagnant wage growth are likely to keep consumers tethered in the months ahead, even if other corners of the economy begin to recover.

The recovery threads just keep coming.

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http://www.nytimes.com/2009/08/14/business...ml?ref=business

Wal-Mart Stores, the nation’s largest retailer and one of the best-performing chains during the recession, reported a profit on Thursday that was essentially the same as last year’s.

While the results beat analysts’ expectations, they underscored how challenging the retail market has become.

On Thursday Wal-Mart said it made a profit of $3.44 billion, or 88 cents a share for the three months ended July 31; it reported a profit of $3.45 billion, or 87 cents a share, a year ago.

For the quarter, sales at stores open at least a year, a measure of retail health known as comparable sales, fell 1.2 percent, compared to a 4.3 percent increase for the period a year ago. Overall revenue declined 1.4 percent, to $100.08 billion.

“Even with lower sales than we’d expected,†Wal-Mart’s chief executive, Michael T. Duke, said, “we believe that our comparable store sales outperformed the retail sector almost every place where we do business.â€

At Wal-Mart’s United States operations, sales at stores open at least a year fell 1.5 percent, below the company’s guidance of flat to up 3 percent. The retailer attributed the shortfall to more selective spending by consumers, deflation in grocery prices and its underestimation of the benefit it received from the stimulus checks that were doled out last year.

The company nonetheless delivered the profit that it did because of inventory reductions. Its United States stores, for instance, have about $1.4 billion less in inventory than they did this time last year.

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I love the way they think inventory reduction is profit and, I assume, the tandem assumption that inventory can be replenished at the same input costs.

We're living off a massive inventory accumulated in the good times which is a handy safety net. I reckon keeping the cash tied up there is giving a much, much better return than it sitting in a deposit account.

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Empty shelves coming or are the retaileres going to rebuild their inventories, is there any point if there is too much retail space?

http://www.youtube.com/watch?v=bZYWIrpUAZU

Walmart probably had one of the least bloated inventories to start with.

I can see some of the non-food long-tail products in the supermarkets in this country being cut. Can every Tesco really afford to have fifty bicycle chain de-linkers and hundreds of different printer refills sat on its shelves?

Might be an opportunity for independents, if there's any left. I think a lot will go to the internet, most likely.

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Anyone know how their UK arm, Asda, is doing?

Fairly well, judging by the volumes that've been shipped to them for the BTS selling period. A good percentage of their customers can't lose their jobs though, as they didn't have one to start with.

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Fairly well, judging by the volumes that've been shipped to them for the BTS selling period. A good percentage of their customers can't lose their jobs though, as they didn't have one to start with.

That's a pity.... I used to hate shopping there, but was compelled to for a while because it was the nearest big store.

Still, not as bad as shopping at Wal-Mart which I would call a de-humanising experience at best.....

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