Wal-Mart thrives in economic storm

The pieces are all falling into place for a great year for the nation's top retailer.

By Kim Peterson Aug 6, 2012 4:44PM
What's the perfect scenario for Wal-Mart (WMT)? Try a combination of stagflation, low gas prices, a U.S. election year and consumer skittishness.

The ingredients are all there, and that's why analysts with Stifel Nicolaus have upgraded the stock to "buy." The company will succeed even in a slowdown in consumer spending, analysts said.

Post continues below.
Investors have clued into this for months now. That's why, after languishing for years, Wal-Mart shares have shot up 46% in the last year to close Monday at $74.28.

In some ways, Wal-Mart will see a repeat of 2008, a year in which Americans felt the pressure of high gas prices, food inflation and a crumbling housing market. This year isn't an exact repeat -- gas prices are low and the housing market is slowly recovering -- but there are other factors weighing heavily on consumers' minds. Some tax cuts are set to expire at the end of the year, and federal spending cuts may take place weeks later.

Wal-Mart did well in both years. Stifel analyst David Schick said his company's survey showed that more people are making weekly visits to the store. He upped his earnings estimate for the second quarter to $1.20 per share from $1.17 a share, and also hiked his full-year estimate to $5.09 a share from $4.97 a share.

He thinks the company's share price could rise to $83 in the next year.

Wal-Mart went into a spiral after 2008. It reacted to the recession badly and made some unwise moves aimed at grabbing wealthier customers that may be trading down. It cut its selection, rearranged its aisles and upped some prices. It was blindsided by the consumer shift to dollar stores for household goods. It continued focusing on super-sized bundles when shoppers couldn't afford them.

As a result, U.S. sales slumped for nine straight quarters. Management finally reversed that trend by making some key decisions, such as dumping its promotional pricing experiments and returning to its "everyday low pricing" model.

The new strategy is working. Gas prices are low, giving lower-income shoppers more cash to spend. Shoppers are very price-focused in this election year. And finally, Wal-Mart is benefiting from the management problems at JC Penney (JCP) and Sears (SHLD).

More from Top Stocks

Aug 25, 2012 11:31AM
Anyone who shops at chinamart is supporting communism. I for one chose not to further the likes of communist after being involved in numerous fire fights with the little zipper heads. Only good commie is a dead commie!
Aug 10, 2012 11:28AM
People use their low income status to sanction shopping at Wally's but shopping there guarantees that all their employees will continue to have low incomes as will other Americans.  Find somewhere else to shop.  Pay a dollar more at the checkout but for God's sake stop supporting these Nazis.
Aug 9, 2012 12:25PM
hmmm...   I love Walmart.  The problem I have is they stock shoddy goods, usually made in America buy union people.  If you find a Union label on anything do yourself a favor and DO NOT buy it.   If a store has union help you will know, surly, nasty people, devoid of any brains or willingness to help a customer.  Shop elsewhere.

As to Walmart prices, they are good.  They do have more made in America junk that any other store, so you will have to be careful...  
Aug 7, 2012 10:12PM
I've been in Walmart warehouses. I once seen a pallet of used leaking car batteries situated over night next to a pallet of bottled waters. Also, since their workers work multiple departments, I've seen crates of produce left out of the floor while the employee in charge of went to cut fabric in the crafts department.
Aug 7, 2012 7:13PM
i will work 5 jobs so i dont ever have to set foot in a walmart store again, i was out of town and all they had in this town was a walmart.. i had to take a shower when i got back to hotel room just to get the dirty feeling off me ..      
Aug 7, 2012 9:57AM

Sam Walton is spinning in his grave. His body wasn't cold before his children were buying goods made in other countries and having them put made in the U.S.A. labels on them then got busted by 60 Minutes and people still went there to shop. WTF? It will be a frozen day in hell before I step foot in one of their stores.

I read an article about two weeks ago that said if you put the wealth of Sam Walton's children together it equals the lowest 40% of Americans....that's maybe around 100 million people. If we keep this up we'll be just like some other countries in the world. No middle class, just the filthy rich and dirt poor.  

Wal-Mart = WE get wealthy while WE screw you! Thanks America :-)

Aug 7, 2012 9:41AM
what planet do you live on? gas prices are way over inflated and the only reason they went down is the world including the us economys are slowing down. if obama had not shut down all new exploration for gas and wasting billions for bankrupt campaign donors on his green dream we would be paying well below 3 and closer to 2 a gallon. america we are in big trouble. diesel the main stay of our economy is just 30 cents more than reg gas. which means america is awash in it and the rigs moving goods around are sitting in the parking lot. the econmy is tanking again. yes walmart prospers whether a boom or a bust. doesnt take a rocket scientest to figure that out!!
Aug 7, 2012 9:40AM
Aug 7, 2012 9:33AM
Wal Mart thrives because stupid americans love to have their jobs sent to China!
Aug 7, 2012 9:28AM
Walmart will thrive as ong as there are EBT cards.
Aug 7, 2012 9:24AM
Sam Walton is probably spinning in his grave.  I'm sure he would have never considered becoming a store to move Chinese product.  I have made a personal decision that if there is an American made product I will purchase it, even if I have to pay 3 times as much.  At least it will work when I go to use it, unlike 90% of the Chinese made crap.
Aug 7, 2012 9:22AM

Wal Mart is Un-American!!!!  They force companies to export jobs.  Just look how many items on their shelves are made overseas!!! I refuse to shop there.

Aug 7, 2012 9:09AM
"Gas prices are low...." - what country do they live in?!?!?!?!
Aug 7, 2012 9:06AM
I will only go to Walmart if  I really need to buy clothes or get something for my pets. I do not sho there for food.  Because I would implus buy other things there other than food. I would rather go to Cub to get my food items. If I have a probelm finding something I can ask anyone at cub foods and they know where it is. When I went to Walmart to look for something they always send me to the service center.
Aug 7, 2012 8:58AM

The treatment of employees is criminal.

AND, you can't get out of WalMart.   One checker with 38 check-outs.  I once wrote WalMart to suggest that they pick up all the products that are left at the check-out, add up the total sale represented, and then they can see how many more checkers can be afforded.

One old business line says, "When people wan to give you money, don't make them wait."

Aug 7, 2012 8:49AM

Wal mart ( aka China Mart)


 Yes, they may be doing that, but they are still a bunch of crooks and liars... live better "yeah right" Every time for the past 8 months I have gone in there to buy some sale items..


THEY ARE ALWAYS OUT OF STOCK!  Or They do not have it period...  Or they only put so muchof it out .. like one box or case for the whole day... Then you ask one of their stockers to check and see if they have any... The answer is ALWAYS NO...


Why is it .. you can go to the mexcan market and get tomatoes, potatoes and onions.. and other items like walmart sells (FROM MEXICO) for about 1/3 of the price?


So tell me that they are not screwing the american consumer? WHAT A JOKE OR SOULD I SAY THE JOKE IS ON YOU FOR BELIEVING THAT LINE ("walmart live better")

Low gas prices? What are YOU smoking? 4.00 a gallon where I live. Near the historic highs and never close to where they were when Obobo took orifice in  2009. Simple reasons why WalMart is thriving. Low prices. One stop shopping (saves expensive gasoline), Large selection. They are along bus routes so that poor people can get there to spend their EBT cards, Yes, their fresh meats and produce suck, but, everything else is pre packaged so there is no difference. Who cares what WalMart pays their employees? Last time I looked, we  still live in a country where people can choose not to work for someone. We have a stellar public school system that is churning out extremely educated kids who should be able to land high paying jobs just about anywhere, but they are choosing to work at WalMart.
Aug 7, 2012 8:40AM
"Gas prices are low"?!  What state do YOU live in where the gas prices are low?  I want to know so I can move there!
Aug 7, 2012 8:34AM
When you walk into walmart enter a world of unregulations.poison wreaks from the shelves.
Aug 7, 2012 8:26AM

Because they pay Walmart wages?  Or if you want more truth than hoopla:  Because they pay slave wages?  There is an oxymoron in sociology that states:  For the rich to exist, there has to be poor people who supports them.

For capitalism to exist, there has to be ideology zombies that allow it to thrive and prosper while slaves go from bad to worse.

It's shameful that in the 21st century, this "Christian and democratic" nation allows this to happen, while at the same time, making fun of "socialism" where everybody is treated the same and all, not just the elite, the super rich, get liberty, freedom and the pursuit of justice.  In true democracy that is not liberty, that is not freedom, that is not justice, but another rogue regime making the zombies believe in those things, just more virtual reality, more for show and tell than  true reality.

Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

120 rated 1
268 rated 2
439 rated 3
709 rated 4
641 rated 5
609 rated 6
640 rated 7
516 rated 8
272 rated 9
152 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.