If the rumors of the death of retail are true, don’t tell it to the customers and shareholders of Walmart.
Names like hhgregg, Limited Stores and Wet Seal have declared bankruptcy, setting a record pace this year for retailers going broke. Others, such as Macy’s, JCPenney’s and Urban Outfitters, are closing some stores.
But wait. Unemployment is low. Consumer confidence is strong and credit card debt is as high as it has been since the end of the Great Recession. Shoppers clearly are buyers. And we are still buying the same stuff — furniture, clothes, toys — but how and where we are buying is changing. This is the Amazon effect.
While it is hurting some retailers, it isn’t killing retail. Monthly retail sales were up 5 percent in March. That includes in-store and online, including mobile. Sure, e-commerce is growing faster, but retailers keep stocking their shelves and we keep consuming. It’s relevancy and price competition that injure and kill retailers. Just ask Sears or RadioShack.
Walmart sells more than $1 billion of merchandise per day. In the week ahead, the company is scheduled to release its first quarter financial results on Thursday. This is the first quarter since Walmart canceled the effort to compete directly against Amazon Prime’s free two-day shipping service. Instead, Walmart’s newest strategy to battle the Amazon effect is just a few weeks old. In April, Walmart began discounting items shoppers buy online and pick up in stores. Investors will want to hear about any early results and plans to expand the service this quarter.
This year, Walmart stock has been a better investment than the S&P 500 Stock Index. It also has performed better than more than half of the stocks in the Dow Jones Industrial Average. Investors think Walmart and its customers are up to the challenge presented by the Amazon effect.
Financial journalist Tom Hudson hosts “The Sunshine Economy” on WLRN-FM in Miami. Follow him on Twitter @HudsonsView.