Wal-Mart's quarterly earnings down...

...due to increased cost of energy (oil). Not so unusual in the world of business.

But look at this twist discussed in today's NYTimes article: Wal-Mart's big box business model depends on the customer's ability to drive to their stores (and indirectly, the government's ability to provide the transportation infrstructure to do so). Part of the reason it's earnings are down is because people can no longer afford to go to the stores.

"If you have to spend seven or eight dollars to drive to Wal-Mart, it had better be a big purchase," [Joel L. Naroff, the chief economist at Naroff Economic Advisers in Holland, Pa] said, "otherwise the savings won't be that great."

With its customers having grown accustomed to such consistently low prices, Wal-Mart could have a particularly hard time passing on the higher energy costs - both its own and those of its suppliers.

"Wal-Mart made a living jamming costs down on everyone else...Now, how much can they absorb on their own?"


Anonymous said...

This is totally psycho!