Walmart is in a slump due to GAS PRICES!

[azsnowman]

WELL........do I dare say that this is REALLY happening. I said in another thread that the economy was going down the camode, here it is.....Walmart is taking a hit THANKS to gas prices and it's ONLY going to get WORSE!!


http://www.azcentral.com

Wal-Mart labors as Penney shines
Gas prices hurt low-ticket retailer

Anne D'Innocenzio
Associated Press
Aug. 17, 2005 12:00 AM

NEW YORK - Wal-Mart Stores Inc. struggled in the second quarter and muted its earnings outlook on Tuesday, again blaming higher gasoline prices for cutting into spending plans by its low-income shoppers.

In contrast, shoppers at moderate-price department store retailer J.C. Penney Co. Inc. focused on fashion rather than fuel, resulting in strong results and an upbeat outlook.

Still, while Penney's consumers have managed to absorb higher prices at the pump so far, the retailer warned that could change if prices keep rising. The looming concerns over oil prices pushed down shares for both retailers. advertisement




Wal-Mart posted a 5.8 percent gain in second-quarter profits, beating Wall Street projections, but the results marked the smallest gain in four years. The world's largest retailer's revenue fell short of projections.

Penney recorded a sharp increase in profits, boosted by strong sales of merchandise across all divisions, and said that annual profits would surpass Wall Street expectations.

The disappointing results from Wal-Mart offer further evidence that the discounter can't rely on the lowest prices to fuel sales and profit growth as rivals such as Target Corp. and Penney, both of which appeal to a higher-income shopper, keep sharpening their merchandising assortment.

While Wal-Mart began to expand into trendier apparel and home fashions this year to make itself less vulnerable to the economy's jitters, the question is whether it can draw in shoppers fast enough to turn business around.

For the three months ended July 31, Wal-Mart earned $2.8 billion, or 67 cents per share, up from $2.65 billion, or 62 cents per share, in the year-ago period.

That was the smallest quarterly gain since the retailer's second quarter of 2001 when it recorded a 2.8 percent increase, according to Thomson Financial.

Wal-Mart reported sales of $76.8 billion for the three months ended July 31, up 10.2 percent.

For the three months ended July 30, Penney earned $131 million, or 50 cents per share, compared with last year's net income of $1 million, which amounted to a per-share loss of 2 cents.

On a continuing-operations basis, Penney's earnings were $122 million, or 46 cents per share, vs. $68 million, or 22 cents per share, a year earlier.

The company's earnings from ongoing business topped the average estimate for income of 40 cents per share from analysts surveyed by Thomson Financial.

[gtalum]

A slowdown in quarterly gain is hardly an economic disaster.

[azsnowman]

A slowdown in quarterly gain is hardly an economic disaster.

"IF" (said sarcasticly) gas prices DON'T come down, it DANG sure will be!!

Dennis

[GalvestonDuck]

Yup, because of the high cost of fuel, truck drivers are going to start charging more for shipping produce, supplies, and merchandise, so no doubt we're going to start seeing increases in prices of more than just gas. I won't be surprised of the price of stamps goes up also.

[gtalum]

That's okay, I don't use stamps any more.

[southerngale]

Walmart's slowdown in quarterly gain is a direct result of the cost of gasoline?

There's a bus stop next to the Walmart stores around here. I guess those people are still shopping.

You'd think the sky was falling.

[CajunMama]

Could have fooled me that Walmart's in a slump...they're not here. In fact it seems MORE people are shopping Walmart.

[gtalum]

Could have fooled me that Walmart's in a slump...they're not here. In fact it seems MORE people are shopping Walmart.

The article simply stated that their profit margin was slightly less than expected. It didn't say anything about customer traffic.

Again, profit growth was slower than expected. That's all. I'm not surprised a bit, since they're paying more to ship goods around the country. Once gas hits $3 nationally, the increases will stop for a while, IMHO. Then things will level off and we'll adjust. it's hard to absorb right now while it's still increasing.

[CajunMama]

Customer traffic doesn't relate to their profit margin? Oooooooooooookay.

[gtalum]

Customer traffic doesn't relate to their profit margin? Oooooooooooookay.

Customer traffic relates to revenue, but not necessarily profit or more importantly, profit margin.

Wal-Mart's prices are pretty much stuck where they are, because they exist in a competitive environment. If their cost for an item (which includes transportation costs) goes up, but their price stays the same, their profit margin drops, no matter how many of that item they sell.

Also, their net profit can increase, while their profit margin shrinks.

It's even possible to have tons and tons of customers and have a net negative profit. Witness the airline industry for an example. They're running at about 90% or more of capacity. But the majors are all losing money because the "discounters' are more efficient and dictate the prices.

[gtalum]

FOr a simpler explanation:

Revenue is the total amount of money brought in over a given period of time.

Cost is the total amount of money spent in that same time frame.

Profit = Revenue - Cost

Profit Margin = Profit divided by Cost.

[Josephine96]

Stock has dropped almost 2 dollars in the last 2 days

[wxcrazytwo]

SAD TO SAY WALMART ACTUALLY POSTED 2ND QUARTER PROFITS, BUT THE GASES ARE CHIPPING INTO THEIR PROFITS..

[JenBayles]

Customer traffic doesn't relate to their profit margin? Oooooooooooookay.

Customer traffic relates to revenue, but not necessarily profit or more importantly, profit margin.

Wal-Mart's prices are pretty much stuck where they are, because they exist in a competitive environment. If their cost for an item (which includes transportation costs) goes up, but their price stays the same, their profit margin drops, no matter how many of that item they sell.

Also, their net profit can increase, while their profit margin shrinks.

It's even possible to have tons and tons of customers and have a net negative profit. Witness the airline industry for an example. They're running at about 90% or more of capacity. But the majors are all losing money because the "discounters' are more efficient and dictate the prices.

Coundn'ta said it better myself.

[wxcrazytwo]

Customer traffic doesn't relate to their profit margin? Oooooooooooookay.

Customer traffic relates to revenue, but not necessarily profit or more importantly, profit margin.

Wal-Mart's prices are pretty much stuck where they are, because they exist in a competitive environment. If their cost for an item (which includes transportation costs) goes up, but their price stays the same, their profit margin drops, no matter how many of that item they sell.

Also, their net profit can increase, while their profit margin shrinks.

It's even possible to have tons and tons of customers and have a net negative profit. Witness the airline industry for an example. They're running at about 90% or more of capacity. But the majors are all losing money because the "discounters' are more efficient and dictate the prices.

Coundn'ta said it better myself.

Actually, in Walmart's case, Walmart dictates the prices. The discounters are allowing their products into Walmart because they know that's were people go to shop and by their products. Now, Target is an animal that Walmart is having a tough time competing against, because Target has found their customer niche. Walmart will always have a profit of some sort, and you can't please all the BOD'S..

[gtalum]

Wal Mart currently sets prices only because they are generally the lowest. However, they must remain the lowest to stay competitive. If Wal Mart raises their prices into Target's price range, Target will destroy them, because it's such a superiror place to shop. Wal Mart wins purely on price.

Please notice that teh article posted by the OP didn't spell doom and gloom for Wal Mart. their profit just grew at a slightly slower pace than expected. They're still turning profit, and in fact they're still turning a bigger profit than they did last year.

My guess is they'll just squeeze their suppliers a little bit more and their margin will be right back where they want it by the end of the year.

[coriolis]

Well considering that you drive about 5 miles to negotiate their parking lot, and you wait in traffic for about 20 minutes to get OUT of their parking lot, I'd say that gas prices WOULD affect them.

[southerngale]

Well considering that you drive about 5 miles to negotiate their parking lot, and you wait in traffic for about 20 minutes to get OUT of their parking lot, I'd say that gas prices WOULD affect them.

Btw, I shop Target and Walmart regularly and I often find things at Target cheaper than I could buy them at Walmart. Of course this is usually (but not always) due to weekly sales or clearance specials. But I do well at finding deals at both places. Target is definitely a much nicer store though. They keep a buggy with my name on it.

[HollynLA]

I'm officially boycotting walmart in my hometown. I may have to drive alittle further to get to Target but I'm sick of the way Walmart treat's their employees. A close relative of mine worked for them for 7 years, never a problem, never a write up, only missed 3 days of work in 7 years, always had excellent reviews, and they fired her over something so unbelievably petty, it's completely insane. They do not value their employees, they treat them like herds of cattle, no wonder they are against union. I plan never to set foot in there again.

[alicia-w]

no sympathy for walmart from me. you reap what you sow.