Wal-Mart released earnings today and revealed that it’s grappling with a slump in sales.
Sales rose 1% to $113 billion, falling below Wall Street’s expectations.
The largest U.S. retailer blamed the miss on a slew of economic factors, including the payroll tax increase, tax refund delays, and even bad weather.
But the scary truth about Wal-Mart’s customers?
They’re broke, said Brian Sozzi, chief equities strategist at Belus Capital.
“They are still living paycheck to paycheck, something that’s not captured in headline jobs numbers but is captured in weak wage growth,” Sozzi said. “Bottom line here: Food and gas price deflation have not yet caused the Wal-Mart shopper to spend more during each trip.”
And the implications could be disturbing for the U.S. economy, writes Anne D’innocenzio at The Associated Press.
Wal-Mart “is considered an economic bellwether because the retailer accounts for nearly 10% of nonautomotive retail spending in the U.S.,” she writes.
Wal-Mart CEO Mike Duke acknowledged the retailer’s customers were struggling because of the payroll tax hike in an interview with Women’s Wear Daily last year.
“They are middle-class Americans and those aspiring to join the middle class,” Duke said. “Our customers are working hard to adapt to the ‘new normal,’ but their confidence is still very fragile. They are shopping for Christmas now and they don’t need uncertainty over a tax increase.”
Business Insider Emails & Alerts
Site highlights each day to your inbox.