February 20, 2014: Today the world’s largest retailer posted a staggering 21 percent drop in fourth quarter profit and. Walmart quickly blamed bad weather and cuts to food stamps, but this is a weak excuse at best. Even Walmart doesn’t seem to buy their excuses because they slashed their profit forecast for the rest of the current year. Per Walmart’s rationale, the cut would only be justified if they expected more snow this summer! A closer look reveals a much direr situation in the US economy. As the world’s largest retailer, a near quarter drop in profit is the proverbial canary in the coal mine for the US retail market.
Contrary to the endless spin vomited by the US mass media and Obama White House, the economic reality is grave. The US economy never recovered and is about to fall off another, much larger cliff. As a result of inflation, un/underemployment, high taxation, suffocating regulation, sky high food and fuel costs, centralized economic planning, massive debt, and an industrial base that has gone overseas, the US economy is now in shambles. For the majority of Americans, they have witnessed over the last decade a near total destruction of their wealth and a rapidly deteriorating standard of living. Americans no longer have the disposable income they enjoyed just six years ago and as a result are not spending money. This fact has been demonstrated by repeatedly bad retails sales numbers that go much further back than any snowstorms can justify this winter. As a result, the retail sector of our economy is suffering the initial brunt of the next wave of collapse. The result of this will be a tidal wave of retail stores shuttering store fronts this year. Already there are historic levels of vacant retail space in the US and this datum point is set to rapidly rise.
Consider that Wal-Mart earned $4.43 billion in the quarter that ended Jan. 31, 2014, which was over a BILLION dollars less than its posted $5.6 billion earnings for the same quarter just a year earlier. A billion dollar difference! The weather and food stamps simply are not sufficient to justify this near one quarter loss in profit. For starters, let’s dispatch the snowstorm myth. Every winter, including last winter brought cold weather and snowstorms that spread across the country. Demolishing the food stamp myth is even easier. First, if the majority of shoppers at Walmart are welfare and food stamp recipients, our country has already gone over the edge and no longer has a productive middle class. This stat alone would spell disaster for the US. Second, and more specific to dismantling the Walmart alibi, the amount of people and thus the overall amount of money paid out in food stamps actually increased over the period. That would mean their profit from food stamp recipients should have gone up now down. Furthermore, even though the food stamp programs’ overall $80 billion annual budget was only cut by about $4 billion, Walmart seems to think it alone endured over a billion dollar loss as a result. Only a fool could conjure this type of math knowing full well that would represent well over 100% of what has allegedly been cut to date in payouts from the program.
Walmart’s excuse for the collapse in profits is a pure lie to placate stockholders and the real data are far scarier. Illustrative of this fact is that Wal-Mart itself reports that its stores, which account for about 60 percent of its business, recorded their fourth consecutive quarter of revenue declines at stores that have been open at least a year. This revenue report undeniably shows that revenues were dropping long before any snowstorms or cuts to food stamps. No business, not even Walmart can withstand near 25% quarterly drops in profit for long.
What we are witnessing now is the collapse of retail, which will ripple throughout the economy in the form of job losses, higher unemployment, and even less income. This will undermine government tax revenues, kill manufacturing, pop the housing bubble, and cripple the overall economy. As we have been warning, the next, much bigger, economic collapse is nearing and you need to prepare. Woe be the economist that shrugs off consistent reports of massive retail losses; especially, when they are coming from the world’s largest retailer.
By Guiles Hendrik
February 20, 2014
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