Walmart Has To Overcome A Scary Reality About Its Customers

Business Insider

Today, Walmart reported weak results in the third quarter. 

Sales were up 1.3 percent, compared with the 2.7 percent that analysts expected. Walmart noted higher gas prices — because customers are paying more for fuel, they're not going on as many shopping trips. 

But Walmart is facing a scary reality: the ailing finances of its core customers, said Brian Sozzi, chief equities analyst at NBG Productions. 

" I don’t believe it’s a market share loss issue, rather the fundamental health of this particular customer group is concerning," Sozzi said. 

In other words, Walmart's attempts to beat out competitors like Target and Kmart this season won't matter much if its customers aren't spending in the first place. 

Walmart CEO Mike Duke told Women's Wear Daily that his customers are among those most affected by concerns about the fiscal cliff. 

“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.”

The numbers Walmart reported back up Sozzi's view: traffic is nearly flat from a year ago. The picture is also bleak at Sam's Club, with executives saying that customers aren't shopping as much and are trading down to cheaper items when they do. 

Walmart's holiday depends not on its ability to offer the best merchandise or sales, but on the financial health and confidence of its consumers. 

DON'T MISS: 18 Facts About Walmart That Will Blow Your Mind >

RELATED: HERE'S ONE WAY TO HELP THE ECONOMY: Walmart Could Give Every U.S. Employee A $5,000 Raise



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