Since 1962, cost-smart consumers have known that anything they need could be found for rock-bottom prices at what has become the primary United States retailer - Walmart. So what happens when Walmart, the bastion of strength for the retail industry, expects hard times? The answer is that everyone begins to prep for hard times. That is precisely what happened this Monday when Walmart announced that its expecting a 11 to 13 percent drop in annual profit for this year. (Person and Cavale, 2022) Overnight, the value of their stock dropped by 10% and other companies like Target and Amazon shortly followed. The culprit is likely the rising inflation and its effects on customers. With prices rising precipitously, consumers are becoming frugal in their spending. In fact, the US Census Bureau reports that "inventories at general merchandise stores at the end of April were the highest since at least 2000." (Census Bureau, 2022) Meaning, that items are no longer flying off the shelves. Additional complications with supply chains have not helped either. Together, U.S. retailers were down more than $100 billion in stock market value. While the short-term and medium term stimulus checks and loans during the pandemic helped keep the economy rolling, the country is experiencing more of the long term ramifications. In order to battle the headwinds, Jerome Powell just announced another move in monetary policy - a 2-2.5% increase in interest. (Bloomberg, 2022)
Do you all think this will be helpful?
Brad
Citations
Bloomberg. (July 27, 2022.). Powell Signals More Fed Hikes Coming. Bloomberg.com. Retrieved July 27, 2022, from https://www.bloomberg.com/news/articles/2022-07-27/powell-signals-more-hikes-coming-leaves-out-details-this-time
Person, & Cavale, S. (2022, July 26). Walmart 'train wreck' profit warning sends shares down 10%. Reuters. Retrieved July 27, 2022, from https://www.reuters.com/business/retail-consumer/walmart-cuts-full-year-profit-forecast-2022-07-25/
Census Bureau (2022).Retail Index. https://www.census.gov/retail/index.html
Walmart and its close rival, Target, have experienced an surplus of inventory with the rise of inflation this year. This has led to a significant amount of discounts to try and get rid of excess. During the pandemic, consumers looked Rostock up on essentials, lockdown hobbies, and home goods. Rob Wile of NBC (2022), writes that "as the economy has reopened and as supply chains have recovered somewhat, retailers have found themselves left with excess merchandise." As the world has opened up again, consumers have shifted their demands, and businesses are trying to catch up and adjust accordingly.
References
Wile, R. (2022, July 26). Walmart is slashing prices to get rid of excess inventory. NBCNews.com. Retrieved September 3, 2022, from https://www.nbcnews.com/business/consumer/walmart-slashing-prices-get-rid-excess-inventory-rcna40033
Evelyn Lara-Mason
Wk 6 Blog Response 2
Hello Bradley,
Timing is always a crucial factor when looking at why a stock is going down. Is it just coincidence that Walmart is now starting to feel the pinch from so many competitors doing what they set out to do so long ago after a pandemic? This is a question that may not be about whether Walmart is folding but rather is it time for a new direction? Aspirations can arise when there seems to be no other options available (Montani and Staglianò, 2021). However, if we use the vanishing point process to analyze and find new options, maybe a new direction can unfold and bring innovation to the established retail sale number one slot sales holder (Decisive, 2013). Having hope in how to feel at peace when the scales feel unbalanced, causing discomfort. These worries remind me of John 14: 27. The bible states, “Peace I leave with you; my peace I give you. I do not give to you as the world gives. Do not let your hearts be troubled and do not be afraid (NIV). Finding faith to lead from hope can feel daunting but with the right attitude it can create a positive mindset to make change easier. When I think of Walmart, I do believe a new perspective of what the consumer needs are outside of low prices is due. Taking the time to process and evaluate customers’ needs now verse pre-pandemic wants can give a new understanding of how to change direction. If you want to be noticed, you don’t stand in a crowd, you get in front of it. Being transparent with the use of critical spotlighting in all areas can come from using local merchants in small batches to create prices for items just the way oil prices are used to increase profits. When there are bottle necks and shortages, using small companies can be a new direction. When too much of a good thing happens for too long, people come to expect. However, the person who shops by what they are consuming is not looking for just the cheapest price but now value for their dollar includes the best quality. I believe Walmart can find new advances and prosper in the market. They simply need to se what is not working, one aspect at a time to reduce over thinking and go back to the entrepreneurial mind of Sam Walton and rethink great service and value (Cowen and Tabarrok, 2021).
References
Cowen, T. and Tabarrok, A. (2021) Modern Principle of Economics. Worth Publishers.
Heath, C. and Heath, D. (2013) Decisive: How to make better choices in life and work. Crown Publishing Group.
Montani, & Staglianò, R. (2022). Innovation in times of pandemic: The moderating effect of knowledge sharing on the relationship between COVID‐19‐induced job stress and employee innovation. R & D Management, 52(2), 193–205. https://doi.org/10.1111/radm.12457
New International Version (2022) Bible Hub. https://biblehub.com/john/14-27.htm
Brad,
I enjoyed reading your post on Walmart, and the economic hardship this company is facing as a result of rising inflation. I'd like to include a mention of how Walmart's shares have been impacted as well. "Walmart shares fell after the company cut its profit expectations as inflation forces shoppers to spend more on food and less on electronics and other discretionary categories.". (Repko, 2022) When the economy suffers from inflation, the federal reserve tries to reduce the money supply by raising the federal
funds interest rate. Based on the information provided, what do you assume will happen next?
Thanks.
I think your post if very interesting. It shows that no company is safe from the rising cost of products or the rising interest rates put on us from the Fed. Walmart has always been the go to for lowest prices and now that is not necessarily so.
@Bradley Andrews
Walmart is the best! :) I think it's brilliant on their part to prepare for hard times, as you mentioned. COVID taught that hard lesson to every business, how to expect for things that you would never expect. Thanks for your post bro!