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Wal-Mart still OK in economic slowdown

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Steve Chiotakis: We’re gonna hear from Wal-Mart today. The retail giant releases quarterly earnings before the opening bell. And while it’s seen a bit of a slowdown in this economic fallout, it’s still been a bright spot in an otherwise lousy industry. And it’s actually boosted its advertising budget to keep consumers walking through their doors. Danielle Karson reports.


Danielle Karson: Just about every retailer is slashing prices and cutting inventory. Most have scaled back their advertising. Except Wal-Mart, which is shelling out millions.

But retail analyst Howard Davidowitz says it’s small potatoes.

Howard Davidowitz: As a percentage of sales, Wal-Mart is a very small advertiser — $300 million sounds like a big number, but they’re doing $300 billion. It’s a very teeny number.

Retail numbers show consumers are pretty much just spending to put food on the table and clothes on their backs. Davidowitz says that’s what’s keeping Wal-Mart’s books in the black.

Davidowitz: They sell tons of food and they have a strong price image, and they’re perfectly positioned for this economy, and they sell what you have to have cheap. That’s what’s winning.

Davidowitz warns Wal-Mart’s strength could be a weakness down the road. Many of its customers are poor, and a long recession could hurt their buying power.

I’m Danielle Karson for Marketplace.

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