Wal-Mart to Investors: Consumers Are Hurting

For months, skeptics like Barry Ritholtz have expected, despite the cheery assurance of bulls, that consumers would start to curtail spending as a result of the housing bust and rising food and energy prices. After all, homes have become a near-ATM, as the savings rate has been negative for over two years (although recently it became positive due to change in measurement methods….).

The optimists still believed that even as the growth in consumer spending slowed, as it did last month, the public would shift its spending to discounters, so that sector of the market would benefit.

Wal-Mart just threw a bucket of cold water on that idea. From Bloomberg:

Wal-Mart Stores Inc. and Home Depot Inc., the two largest U.S. retailers, said the housing slump, turmoil in the credit markets, and higher energy prices will depress earnings for the year….Wal-Mart blamed higher gasoline prices for fewer visits by shoppers, which prompted the company to slash prices on thousands of back-to- school items.

“U.S. consumers continue to be under difficult pressure economically,” Wal-Mart Chief Executive Officer H. Lee Scott said on a recorded call today. “It is no secret that many customers are running out of money toward the end of the month.”….

“Consumers today are pressed by a number of factors,” Wal-Mart U.S. stores chief Eduardo Castro-Wright said. “Higher energy, higher gas prices and higher interest rates are all stretching their paychecks.”

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One comment

  1. Anonymous

    I know they say its gas prices and everything, but has anyone considered that walmart and home depot are actually miserable places to shop nowadays? Given my druthers, I’d rather go to kmart or home depot any day

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