Wal-Mart Just Killed The Dream Of Pricing Power Joe Weisenthal Apr. 9, 2010, 9:50 AM
So much for the idea that the economic rebound would see a return to strong pricing power.
Wal-Mart (WMT), perhaps the most deflationary force in the history of our republic (tied with the internet, perhaps), is set to cut prices on over 10,000 items, according to WSJ.
The news comes a day after a slew of retail sales that, on the surface, seemed to be showing gangbuster growth (though there were a handful of reasons to temper your enthusiasm).
Of course, that won't stop analysts and the street from going insanely gaga for retail right now.
Here's Bill Dreher of Deutsche Bank with what we think is the status quo right now on retail:
Our Broadline sales index increased +8.3% in March (vs. -4.6% LY), well ahead of +6.1% consensus and our +6.8% est. March sales results managed to surpass lofty expectations across all sub sectors of Broadline retailing, as top line strength was no longer limited to just the discounters.
Merchandise mix also appeared to be very strong, led by the high margin category of apparel. JCP was the only retailer to just meet consensus, with every other company reporting March sales beats, as sales appeared to be sluggish in Penney’s home category. Basically, the greater the percentage of apparel sales a retailer had, the stronger March comp results were, which drove particularly strong sales at the department stores, continuing a four month trend. The department stores’ +12.5% comp easily beat the +7.9% consensus est and our +10.8% est. The biggest outperformance came from KSS, JWN, SKS, and DDS.
Funny now prices can fall in a period of economic growth! It's so strange. Hmmmmm....
