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Walmart earnings up, but not upbeat

Eve Troeh Aug 16, 2011

Walmart earnings up, but not upbeat

Eve Troeh Aug 16, 2011

Kai Ryssdal: The corporate story of the day today comes to us via Bentonville, Ark. Walmart announced quarterly profits that beat expectations this morning. On the face of it: good news.

But one can only rarely take corporate earnings reports at face value. Most of the growth? From the developing world. Here at home, a decline in sales at existing stores. A decline by the way, not all of which — to bury the lede a bit — is because of a weak economy.

Marketplace’s Eve Troeh reports.

Eve Troeh: Walmart’s seen weak domestic sales for more than two years now. It blames everything you’d expect a company to blame during a recession. In today’s earnings call, Walmart CEO Mike Duke said people are most worried about jobs and food prices.

Mike Duke: They’re trading down to stretch their budgets — buying a lower-priced brand of detergent and buying half-gallons of milk instead of gallons.

That’s what Walmart’s own consumer focus groups say. They also say gas prices have taken a backseat, so customers don’t mind driving to Walmart more often. But the economy’s not the only thing driving sales, says Budd Bugatch with investment firm Raymond James.

Budd Bugatch: Some of the problems that it’s encountered have been of its own making.

He says Walmart streamlined its inventory and cut some products people really liked. Plus, Walmart needs to do better reminding people why they shop there.

Bugatch: Going back and re-emphasizing its everyday low price.

Walmart has been putting items back on the shelves, lowering prices and telling people about it. And that’s why U.S. sales — while still slow — have been stronger the past few months.

But Burt Flickinger at Strategic Resource Group says two years of weak sales show the company’s lost its edge.

Burt Flickinger: In the prior six recessions, the worst economic times were the best of times for Walmart.

He says Target, Kroger, Costco and CVS have managed to grow, so Walmart’s getting squeezed by competition.

I’m Eve Troeh for Marketplace.

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