A Scary Reality About Wal-Mart's Customers: They're Broke

Business Insider

Wal-Mart shares are tanking after the company's executives called February sales a "total disaster."

“Have you ever had one of those weeks where your best-prepared plans weren’t good enough to accomplish everything you set out to do?” Wal-Mart exec Cameron Geiger wrote in one of the emails reported by Renee Dudley at Bloomberg.

“Well, we just had one of those weeks here at Walmart U.S. Where are all the customers? And where’s their money?” Geiger asked. 

Wal-Mart is facing a scary reality: the ailing finances of its core customers, Brian Sozzi, chief equities analyst at NBG Productions, told us.

"Wal-Mart shoppers are the barometer of the U.S. consumer, and these emails reflect common sense about customers," Sozzi told us. "The consumer isn't mentally or physically ready to spend on discretionary inventory and there's no reason to be optimistic."

"The fundamental health of Wal-Mart's customer is concerning," Sozzi said. 

The numbers Wal-Mart reported at earnings reveal a troubling trend. Traffic is nearly flat from a year ago, and Sam's Club executives said that customers aren't shopping as much.

The Wal-Mart executives blamed the hike in payroll taxes and a delay in tax returns for why customers aren't shopping, according to Dudley's story. 

"When a payroll-tax break expired Dec. 31, Americans began  paying 2 percentage points more in Social Security taxes on  their first $113,700 in wages," Dudley reported. "For a person making $40,000 a  year, that is about $15 a week."

Wal-Mart CEO  Mike Duke   told Women's Wear Daily  last year that his customers weren't confident in the economy. 

“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.”

Now Watch: Economist Paul Krugman Explains How We Should Be Taxing The Rich

  //
Please enable Javascript to watch this video


More From Business Insider
View Comments (235)