Wal-Mart Lives Up To A Promise: Doing Well In A Recession (WMT, TGT, COST)

Wal-Mart (NYSE: WMT) is managing to actually hold up well in an environment where almost all retail and consumer discretionary stocks are stinking up the stock exchanges.  It seems that whether you like the stores or hate the stores that maybe it actually does do well in a recession.  As consumers are tightening up their purse strings, they might be turning into Wal-Mart shoppers whether they like it or not.

Last year I actually noted on an interview on CNBC that Target Corp. (NYSE: TGT) would underperform versus Wal-Mart.  My counterpart Dana Telsey didn’t really agree with the call, but frankly my reasoning for the call wasn’t so much the economy at the time as much as it was relative performance and a complete decoupling.

In fact, I even gave Lee Scott a pass this year on the 24/7 Wall St. list of CEO’s THAT NEED TO GO because of the slowing economy and because there is no point beating a dead horse.  It isn’t so much that Wal-Mart is that great of retail destination.  They can just out-cheap every other retailer.  When your job is on the line, or when you are financially over-extended, or if you are just worried about your savings, choosing Wal-Mart over other stores isn’t that big of a stretch.  Our 10 STEP PROGRAM didn’t really include a recession, but a recession can be some managers’ best friends.

Wal-Mart’s last sales projections were far superior to those of general retail trends.  Maybe Lee Scott’s message should have been "Get off my back, a recession is coming soon and we’ll do well then."  The good news is that he can hire Chuck Prince to man the door as a greeter and he can hire Michael Cherkasky for the security team.

Jon C. Ogg
January 16, 2008