Wal-Mart still OK in economic slowdown
Wal-Mart has been one bright spot in retail through the economic fallout and has actually boosted its advertising budget. Danielle Karson reports what's keeping the chain healthy and what could hurt it down the road.
A Wal-Mart in Panorama City, Calif. (Robyn Beck/AFP/Getty Images)
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TEXT OF STORY
Steve Chiotakis: We're gonna hear from Wal-Mart today. The retail giant releases quarterly earnings before the opening bell. And while it's seen a bit of a slowdown in this economic fallout, it's still been a bright spot in an otherwise lousy industry. And it's actually boosted its advertising budget to keep consumers walking through their doors. Danielle Karson reports.
Danielle Karson: Just about every retailer is slashing prices and cutting inventory. Most have scaled back their advertising. Except Wal-Mart, which is shelling out millions.
But retail analyst Howard Davidowitz says it's small potatoes.
Howard Davidowitz: As a percentage of sales, Wal-Mart is a very small advertiser -- $300 million sounds like a big number, but they're doing $300 billion. It's a very teeny number.
Retail numbers show consumers are pretty much just spending to put food on the table and clothes on their backs. Davidowitz says that's what's keeping Wal-Mart's books in the black.
Davidowitz: They sell tons of food and they have a strong price image, and they're perfectly positioned for this economy, and they sell what you have to have cheap. That's what's winning.
Davidowitz warns Wal-Mart's strength could be a weakness down the road. Many of its customers are poor, and a long recession could hurt their buying power.
I'm Danielle Karson for Marketplace.
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