Bloomberg reported yesterday that the panicked emails between Wal-Mart execs might show what is happening to all retail chains in the United States. It is referring back to a story from a couple of days earlier, “Wal-Mart Executives Sweat Slow February Start in E-Mails.”
“Wal-Mart Stores Inc. had the worst sales start to a month in seven years as payroll-tax increases hit shoppers already battling a slow economy, according to internal e-mails obtained by Bloomberg News. ‘In case you haven’t seen a sales report these days, February MTD sales are a total disaster,’ Jerry Murray, Wal-Mart’s vice president of finance and logistics, said in a Feb. 12 e-mail to other executives, referring to month-to-date sales. ‘The worst start to a month I have seen in my ~7 years with the company.’”
MTD means “Month to date”
Anyone reading the emails might figure that Wal-Mart is probably not unique. Bloomberg has confirmed this deduction:
“‘It’s not Wal-Mart specific,’ David Strasser, an analyst for Janney Montgomery Scott LLC in New York, said in a telephone interview yesterday. Family Dollar Stores Inc., Target Corp. and supermarkets are encountering similar effects, he said. ‘Anyone with any low-end exposure is going to feel this. That customer runs out of money every day as it is. Now they’re really going to run out of money.’”
The consensus among retailers is that the uptick in taxes has impacted spending. Even a seemingly trivial tax issue seems to have amazing consequences:
“In addition, tax returns may be delayed in part because of the late release of forms, Wal-Mart, the world’s largest retailer, said in a report. Delayed tax rebates will be ‘a significant short-term issue’ for retailers such as AutoZone Inc. and Advance Auto Parts Inc. as well as Wal-Mart, David Schick, a Stifel Nicolaus & Co. analyst, wrote in a Feb. 15 report. ‘I think it’s broad,’ Schick, based in Baltimore, said in a telephone interview.”
It is nauseating to learn that retailers nationwide have come to depend on tax refunds to surge their sales. But if mere timing or refunds can have that much impact, then we know that real tax increases will do much more damage. Bloomberg says that a $40,000-per-year income loses is now losing about fifteen extra dollars a week to the Social Security tax. That little bit of cash, multiplied by the millions of households, can have real consequences for national retail store chains.
What is amazing is how the Obama Administration keeps talking about how, any moment now, they are going to suddenly concentrate their massive expertise to create jobs. Here is the first thing they can do about jobs: Stop ending them!
When George W. Bush sent out “stimulus” checks as his answer to the sluggish economy, conservatives knew he was being stupid, but Obama thought it made perfect sense. After that, Obama got a massive “stimulus” bill passed that did nothing for the economy. What is bizarre about all this is that these people insist that consumers need to spend more, but at the same time, deny that taxes are too high. So, in their world, the government takes more money from people and then gives it back to “them”—never the same people they took it from in the same amounts, of course—to create the spending that has been damaged by the taxes in the first place.
So far, Federal Reserve Chairman Ben Bernanke’s money-printing has made the US stock market look like it is climbing. But for how much longer can he keep it up?
“The payroll-tax increase may keep pressure on consumer spending, Daniel Binder, a Jefferies & Co. analyst in New York, wrote in a Feb. 15 report. It’s reasonable that Wal-Mart sales would be hurt and “we suspect the same holds true for other retailers serving middle to lower income consumers as well… The wrong thing to do now is panic with knee-jerk selling on the broad group,’ Binder said in the note.”
Binder’s argument is that higher end consumers might go lower. I guess he has in mind Target shoppers becoming Wal-Mart shoppers. Maybe, but I have my doubts. Whenever anyone tells me now is not the time to panic, I tend to interpret the advice as a signal that it is time to panic. Just how much warning did CNBC or Bloomberg give us about the crash in 2008?