Walmart and Deflation

Last year as the economy slowed, Walmart sales kept rising. It became the store of last resort. So it's certainly interesting that in the last quarter, Walmart announced its first ever sales decline. The FT has the article stating:

Walmart the world’s largest retailer, said comparable sales at its US stores fell 2 per cent during its fourth quarter against last year, and warned of a “more challenging” first quarter in the US, compared with last year’s strong growth.

and

Walmart attributed the fall to factors including deflation in the price of groceries – which account for more than 40 per cent of US store sales – and electronics such as flat-screen televisions.

and

It ended the year with inventory down 7.8 per cent against the same period last year, as it continues its store profitability drive and benefited from deflation. “US sales will be more challenging in the first quarter, as Walmart US cycles through strong year-over-year comparisons and deflation,” he said.

They do seem a little confused on whether they're benefiting or hurting from deflation. Finally we get our requisite Morning in America spin from the CEO. It's interesting how the politicians in this country take so much grief for the garbage they spew, but if anyone's ever listened to one of our mega-corporate CEOs, most of our politicians pale in comparison:

Mike Duke, chief executive, said Walmart earnings for the fourth quarter had exceeded its expectations, reflecting “the ongoing underlying strength of our business” and its focus on “delivering growth, leveraging expenses and improving returns”.

As the great corporate globalization experiment was undertaken over the last three decades, the undeclared deal was Wall Street and our mega-corporations shuttered the American industrial base, made a lot of money reopening it across the planet, American wages stagnated or went down, but we all got to shop at Walmart which imported formerly US manufactured products at cheaper prices to go with the lower wages. This process was over several decades, but in the last year, there was a new and significant leg-down, and now many can't even afford to shop at Walmart, which ain't great news for the Chinese either.

The new normal is slowly emerging, it's going to force us to do a lot of things differently. If we do it right, we can do it better, but it means we need to change.