The idea that Wal-Mart Stores Inc. is a reverse indication of U.S. economic growth hasn't been lost on Douglas McIntyre, a blogger at 24/7 Wall Street. In a posting on Tuesday, he noted that the retailer had an extraordinary quarter, with sales rising more than 10 per cent over last year and net income rising nearly 7 per cent.
Yes, some of these gains are because of strong results from overseas – particularly Mexico and China – where economic growth remains strong. But Wal-Mart is performing well even in the United States, and the reason is pretty clear: Its price points are particularly attractive when times are tough, with Wal-Mart stealing business from other retailers.
“The world's largest retailer has become a reverse indication of overall GDP,” Mr. McIntyre said. “With inflation running through the economy and a recession hurting most of the country, Wal-Mart may be in for a good, long run.”
Curiously, this implies that the U.S. is a “buy” when Wal-Mart underperforms and a “sell” when it outperforms. Perhaps that helps explain why the Dow Jones industrial average is down 42 points in mid-morning.
