Looking at the disappointing numbers out of Walmart, one tries to piece the story together. The economy may well be recovering, but is the improvement substantial enough to see Walmart shopper move up to premium retailers? Obviously the answer is a no, the economy may be looking better from an investor standpoint, but with increasing fuel cost Walmart customers are still pinching pennies. The information provided this morning by the company gives insight into what may be happening. Looking at the numbers Walmart 4th quarter profits took a beating and the company warned investors that they should expect margin declines in the future. this leads one to wonder, why is Walmart not excelling in current market conditions? The two word answer, is Dollar General.
Above is a graph depicting the stock performance between Dollar General and Walmart over the past year. The chart makes obvious the story this article is attempting to make a point of. Dollar general due to its limited square footage and fewer employees can offer lower prices. This by no means suggests that the Walmart business plan is failing, it is merely bringing light to the fact that consumers are truly pinching pennies. As gas prices continue to speed higher, consumers will continue to look for way to save money. Dollar General gives shoppers the benefit of not only better prices, but allows the to avoid the headaches of the Walmart superstores. The graph above tells it all and today not only continues to reaffirm the struggling consumer but suggest that they are being even more frugal than was expected.
“There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.” – Sam Walton
