Today is Retail Day. Let’s stick with that theme.
Wal-Mart (WMT) surprised to the upside, event though they were widely projected to be a
laggard. As a company, they posted a 2.4% increase in US June
same-store-sales (excluding fuel). The Wal-Mart stores saw a 1.6% gain, while membership wholesaler Sam’s Club posted a big 6.9% jump (excluding
fuel). The rest of the Retail complex was mixed.
Markets are rallying on the news.
Following our discussion yesterday on core-inflation (ex-food and energy), and given that Wal-Mart is the biggest supermarket in the country, I am curious as to this small detail:
How much of Wal-Mart’s gains are due to food inflation?
The firm refuses to report ex-food, although they do report ex-energy. Inquiring minds want to know!
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Here’s the WSJ public page on retailers:
Great point…CNBC alluded to the fact that WMT’s big gains were at Sam’s Club, and Costco had gains as well due to food inflation. But all is well…Haines is trumpeting a “Banner Day” and Yardeni came on declaring this the “Greatest Global Boom of All-Time”. Of course, that would be followed by the biggest global bust, unless the world engineers a soft landing.
Walmart is the #1 food retailer, are they not?
You do make an extremely good point: if you exclude food from the CPI numbers, it is not honest to include them in the retail sales numbers.
Can I ask…seeing as how WMT was up but stores like Macy’s and Target were off…how do we know that this is not because lower-middle income shoppers who recently thought they could shop at more upscale stores, now realize they can only afford WMT stuff again?
The food inflation point is well taken though.
re: food inclusion, very solid point but i would argue that it be included since a retailer’s ability to move a product is arguably as important as the base line market cost (increases) at the wholesale level contributing to sales increases. it would be much more transparent to break it out.
One the best posts you have put up BR….
Ciao
MS
The question is how much of this is due to a substitution of Walmart for Target and such, a move to buying giganto size at the wholesale club to save a buck and the sales I see being run by almost store. Not to mention the massive increase in the price of milk, cheese and meat due to corn prices.
I’ll add to Sven’s point: Now that MEW is dropping off, consumers are back to spending earned income, which is spent more deliberately and carefully, as opposed to the “play money” they financed through home equity.
i agree, part of the explanation is target/macy’s wannabes are back to their former club: walmart.
I have to disagree with CNBC and others on the comp-store sales that have thus far been released.
Bulls and bears alike suffer from confirmational and partial analysis. I should know; I do all the time.
CNBC just waxed enthusiastically about retail sales. And a commentator queried a well-regarded retail analyst as she scoffed at the consumer is spent-up, not pent-up thesis.
Once again, I have to disagree with CNBC and others, this time on the comp-store sales that have thus far been released.
Here is my tally.
Category Better Worse
Apparel (Men/Women) 4 8
Apparel (Teen/Children) 4 3
Broadline 1 0
Department Stores 4 3
Dollar Discounts 1 0
Could this just be due to a move by consumers trying to save as much money as possible (because they have none and are charging everything) by moving all their spending to discount retailers (aka Sams Club & Costco)?
I find it comical to read Yahoo! or something and see “Stocks surge on consumer spending” right above an article that says “Stores post lackluster sales in June.”
And finally, with regard to BR’s point about food inflation juicing WMT’s sales, there was this article about Costco selling lots of gas (especially when the price rises) by undercutting the gas station price. That could pump sales in the same manner I guess.
http://www.fastcompany.com/magazine/117/next-innovation-costco.html
Sven-
I’m glad someone else noticed that……..
Doug-
Not quite sure what you’re tally is trying to say…is it missing some scale??
Ciao
MS
Nestle to cut plants, products as prices soar
Nestle, the world’s largest food company, will raise prices, cull unprofitable products and speed up production rationalization to prepare for a lasting rise in commodity and energy prices.
Jose Lopez, management board member at the Swiss-based firm, told Reuters the group’s focus on name-brands, health food, and medical nutrition puts it at a competitive advantage as prices for energy, grain and milk rise on surging demand.
Rising input prices globally will stoke inflation, which will enable Nestle — maker of KitKat chocolates and Nespresso coffee — to pass those costs on to consumers, Lopez said in his first interview as head of operations for the global giant.
“It could provoke moderate inflation and moderate inflation is not a bad environment for business,” Lopez said in his first interview as head of operations for the global giant. “If anything, I can buy better because I am bigger.”
http://www.reuters.com/article/consumerproducts-SP/
idUSL129541020070712?pageNumber=2&sp=true
Perhaps I am missing something. Are same-store sales inflation adjusted? If they are, then I better understand BRs point, because food inflation is running so much higher than core inflation. If not, then why is there exuberance that sales are tracking inflation?
and now the big question becomes….SPX is on the cusp of breaking out, confirming DJI and COMP
A breakout to a new leg up….or a head-fake? Guess the reaction to earnings will tell all.
Blah, so much noise in Walmart sales numbers.
Inflation and Deflation shown in the numbers.
Try to pick something that is as neutral as possible and then look at the delta.
The expectations of substantial food price inflation due to the US push for ethanol fuel bear real examination. This will not just raise US food costs, it will raise worldwide food costs and will change the balance that now exists. Food exporting countries will see increasing income reltive to petroleum exporting countries; countries with lower standards of living will see decreased demand for non-food products. This move by the Bush administration may be aimed at more than simply relieving gas price pressure in the US.
Well the SPX is up ~2.9% in a month, but the dollar fell ~2.9% at the same time.
You wrote:
How much of Wal-Mart’s gains are due to food inflation?
Another angle: How much of Wal-Mart’s gains are due to high ticket low margin electronics, specifically LCD/Plasma TVs?
Once again the data details are diametrically opposite of Street spin.
Wal-Mart, who reported same-
store sales gains of 2.4% vs. its 1% to 2% forecast, stated that home goods and apparel sales were weak but grocery sales surged.
Costco beat estimates by 0.1%, +6% with 5.9% expected.
Target, the second-largest US retailer, reported the expected 3.3% gain.
JC Penney reported a DECLINE of 1.5% but
it was smaller than the expected decline of 3.1%.
Macy’s reported a decline more than the expected 1.7%.
Kohl’s reported a decline of 4.9%, which is much larger than the expected -2.3%.
GAP, the largest US clothing retailer reported a decline of 5%, 4.1% was expected.
Ann Taylor reported an 8.4% decline; 5% was expected.
Limited Brands reported a 3% decline’ -3/1% was expected.
ANF reported a gain of
2% on aggressive discounting of lightweight items; a decline of 2.8% was expected.