Remember this chart from November [4], when everyone was predicting a surge in global GDP and "escape velocity" growth for the US economy on the latest burst of irrational hopium that central-planning works (it doesn't)?
[5]
Well, yeah....
Also, it just got worse. Moments ago WalMart reported in-line EPS driven by flat comp store sales. Curiously, even Wal-Mart is marginally increasing prices to offset a decline in store traffic:
During the 13-week period, Walmart U.S. comp traffic decreased 1.1 percent, while average ticket increased 1.1 percent.
The CEO's take:
“As it relates to our challenges in the quarter, we wanted to see stronger comps in Walmart U.S. and Sam’s Club, but both reported flat comp sales. Stronger sales in the U.S. businesses would’ve also helped our profit performance.”
And when the best priced retailer in the world is forced to start hiking prices to offset declining volumes, what does that mean for cost-push (not its benign wage-driven, demand-pull cousin) inflation?
But the real message, and what suggests global GDP will continue to deteriorate, was that Wal-Mart just did what it has done so many times in the past several years. It cut guidance.
Walmart updated full year EPS guidance to a range of $4.90 to $5.15, from a previous range of $5.10 to $5.45. This range includes third quarter EPS guidance of $1.10 to $1.20. The new full year guidance reflects incremental investments in e-commerce and higher U.S. health-care costs than previously anticipated. This guidance also assumes the effective tax rate will be around 34 percent for the third quarter. The annual effective tax rate is projected to be between 32 and 34 percent. The actual rate will depend on a number of factors, including our performance, discrete items and pending U.S. Congressional actions regarding the extension of certain tax legislation.
Obamacare's fault.
Oh, and those predicting an imminent CapEx renaissance, please don't look at the 16% Y/Y plunge in WMT CapEx in H1. The good news, for shareholders, free cash flow rose to $6.8 billion from $5.2 billion, thanks to a continue decline in investing in the future.
