Economic Update – Wal-Mart Sees Flat Profits, but Still Looks to Global Growth
- May 15, 2009
First-quarter numbers are in from Wal-Mart Stores Inc., and they show that the retail giant continues to attract recession-weary U.S. consumers, but other factors beyond its control have been keeping the retail behemoth from posting higher profits. According to the company, profit in its first fiscal quarter, which ended April 30, was about the same as a year earlier, $3.02 billion, or 77 cents a share. Not shabby, but not what Wall Street expected. The main drag on company profits was the fact that sales internationally were down 11 percent during the first quarter, affected by that curiously strong U.S. dollar, though income in the United States was up 3.6 percent for the retailer. That doesn’t mean that Wal-Mart isn’t still interested in international growth. In a move that could mean that Lenin would need to be tied down in his mausoleum to keep him from rolling over, the world’s largest retailer is actively planning to open stores in the Russian Federation, according to Bloomberg. A Russian newspaper has reported that Wal-Mart is in talks to buy a Russian supermarket chain, OOO Lenta, though Wal-Mart is still mum on that aspect of expansion into Russia. Executives at the Bentonville, Ark.-based company did, however, cite the current fragmented nature of Russian retailing as an impetus for growing its kind of retailing in that country. In other words, in that respect, Russia is something like rural America before Wal-Mart entered the picture decades ago. As part of its bankruptcy reorganization, Chrysler L.L.C. wants to show the door to 789 of its roughly 3,180 retail outlets by terminating their dealership agreements. Some or even most of those former Chrysler dealerships might survive on selling used cars and maintenance services–usually a sweet profit center for dealerships–but the termination of the dealership agreements might push some of them over the edge. The real estate result would be either short-term blight, since few vacant properties are less appealing than an empty car lot some acres in size, or a long-term redevelopment opportunity, depending on how one looks at it. But Chrysler’s former deals would be small in number compared to those of General Motors Corp., which reportedly wants to cut its number of dealerships from 6,200 to 3,600, or even fewer. Perhaps some of those very large, empty lots will be Wal-Marts someday.After the mixed bag of financial news, stocks managed a moderate uptick on Thursday, with the Dow Jones index jumping 46.43 points, while the Nasdaq and S&P saw 25.02- and 9.15-point gains, respectively.