Wal-Mart makes the most of US economic slump
on June 9th, 2008 at 8:48 amARKANSAS: H Lee scott, Wal-Mart Stores’ CEO for the past eight years, is reaping the benefits of demand for his retailer’s discounted goods as the economy slumps and prices soar. Rising gasoline , food and medical costs will drive more customers to Wal-Mart’s more than 3,400 US discount stores and supercenters , Mr Scott told 15,000 shareholders and employees gathered at the company’s annual meeting in Arkansas, on June 6.
The world’s largest retailer is luring customers with $4 prescription drugs and energy-efficient light bulbs. “I thank God we are positioned like we are this year. If you had this economy at this time last year when we were positioned like we were, I wouldn’t be up here,” Mr Scott told analysts.
Last year, Mr Scott turned the Arkansas-based company’s focus back to basic clothing after an attempt to attract higher-income customers with more fashionable apparel failed to drum up sales. For Mr Scott, 59, who oversaw the loss of $115 billion of stock market value in his first seven years at the helm, rising sales are a sign the company is turning around. This year, Wal-Mart is the biggest gainer on the Dow Jones Industrial Average, gaining 23% in New York trading.
A year ago, Mr Scott addressed investors after posting the smallest annual increase in individual-store sales in at least 27 years. This year the annual meeting followed a 3.9% increase in May sales at stores open more than a year, higher than the company or analysts had predicted. “If they had had this economic downturn a year ago, they would be in the same situation,” said, Patricia Edwards, who helps manage $14.8 billion in Seattle.
Wal-Mart said last week that lower prices on groceries, medicines and laptops attracted shoppers. Tax rebates also spurred sales as consumers grappled with job losses and the worst US housing market in a quarter century . Investors pushed Wal-Mart to a four-year high in New York trading last week. However, the retailer’s fortunes might still falter should the economy begin to recover. Mr Scott’s attempt earlier in the decade to push into trendier clothes didn’t boost revenue even as the economy grew.
Wal-Mart is now focusing on its main customers, families in lower-income brackets. In late April, the company started cashing rebate checks for free and cut prices on shampoo, cereal and groceries, targeting Americans who are to receive more than $100 billion in tax rebates through July. That has paid off by bringing in shoppers. Wal-Mart has cashed $350 million in rebates, and an undetermined amount has been spent in the stores, CFO Thomas Schoewe said last week. The results reflect the changes the company has made in the past year after its earlier missteps.
