A Scary Reality About Wal-Mart's Customers: They're Broke

[abbyjoseph]

6. Why Wal-Mart May Never Be Great Again

Wal-Mart (WMT) posted financial results Tuesday morning that aren't as encouraging as they may seem at first glance. Yes, net sales rose nearly 6%, to $108.6 billion, but that was fueled largely by a 10% increase at its Sam's Club warehouse clubs and a currency translation-padded 16% spike overseas. Sales at Wal-Mart's namesake domestic stores clocked in nearly flat.

Earnings per share from continuing operations did spike 12% to $1.09, but that also needs some clearing up. Aggressive share buybacks and a lower effective tax rate are forging the illusion that margins are expanding. In reality, pre-tax profits from continuing operations rose by less than 2%.

Investors may be somewhat relieved -- if not outright pleased -- by the report, but I'm not. Same-store sales at Wal-Mart locations across the United States fell by 0.9%. It's the ninth quarter in the row of cascading comps at the world's largest retailer.

What's Doing in the Discounter

There may be a thousand ways to make a Wal-Mart greeter cry, but all you need are three trends working against the meandering discounter to do it in.

Wal-Mart is losing shoppers. It's falling behind in the digital revolution. There are too many people out there relishing its failures, and it will become a self-fulfilling prophecy if Wal-Mart doesn't wake up and reposition itself properly.

http://www.dailyfinance.com/2011/08/16/why-wal-mart-will-never-be-great-again/