Walmart Botched Q1

A bargain ain’t a bargain unless it’s something you need. [Unsubscribe]( [Wiggin Sessions] August 12, 2022 (Ed. Note: You may have noticed that the missive we sent earlier had nothing to do with "Cryptoland," as its headline suggested. That was a production mistake. Here's a new version with the correct headline. -- Addison) Is Walmart Really Recession-Proof? “A bargain ain’t a bargain unless it’s something you need.” — Sidney Carroll [Addison Wiggin]Dear Reader, Walmart’s Q1 results just came out. According to [corporate]( data, “Walmart International net sales were $23.8 billion, a decrease of $3.5 billion, or 13.0%, negatively affected by $5.0 billion due to divestitures, and $0.4 billion from currency fluctuations.” That’s right, a decrease of $3.5 billion dollars in net sales. The conventional wisdom is that Walmart and its associates are “recession-proof” because they offer lower prices, essential goods. They fared well during the Great Recession and thrived during the COVID daze. That being said, their ‘22 data shows they dropped the ball. [Zach Scheidt on the scene]( It boggles my mind. These are two of the companies [Walmart & Target] that are supposed to know what they're doing. They're supposed to be able to [anticipate what their customers want]( and they just screwed it up really. They basically bought a whole lot of merchandise that they wanted to sell to customers that included patio furniture and big screen TVs and things that people would want at home.The problem is, people are not buying those things right now. People don't even want to be at home right now. In fact, Zach continues: We just got a [huge report]( from American Express, that said their more wealthy customers are spending money on travel and entertainment, and that's where the consumer spending is going. Meanwhile, consumers who are not wealthy are being hurt by this inflation. They're trying to save money on everything that they can and they're not buying patio furniture. They're not buying big screen TVs. Put another way, from the mouth of talking head [Ross Gerber on Bloomberg]( “There’s no recession at Disneyland, I can tell you that.” You’d think Walmart – who was the first global retailer to digitize consumer spending into data points in the 1990s with their Retail Link system – might have a hold on their inventory numbers by now. That’s not the case; they’re operating more like the world’s largest consignment shop. It seems that consumer buying habits act faster than big data can keep up with. Also, what are these divestitures to which the dividend aristocrat so heftily reallocated? Look back to the numbers: “Consolidated operating expenses as a percentage of net sales increased 45 basis points, primarily due to increased wage costs in Walmart U.S.” Wages. Interesting, considering Walmart is also known around the block for their egregious underpaying. So inventory woes plus the workingman’s complaints means a Walmart swing and a miss in the first quarter, as the United States officially careens into bear market recession territory. Luckily, says Zach Scheidt, there is a way to use Walmart’s numbers to our advantage as investors: [This situation is absolutely perfect for a Dollar General, also a TJ Maxx or a Ross Stores](. These companies are now able to buy a ton of great merchandise from the Walmarts, the Targets, the Amazons who are now just trying to get rid of whatever is on their warehouse shelves. They're able to buy them for pennies on the dollar and then they're going to be able to sell them to their customers for much lower prices. It's really a win-win because the discount retailers are now going to be able to generate a profit, they're going to be able to get people to come into their stores, and that's a really good thing, especially in this back-to-school season. Meanwhile, customers who are really hurt by inflation are going to be able to buy some things that they would like to have at super discounted prices. So that helps just the mom and pop consumers to be able to buy things at a lower price. And then for us as investors, being able to pick up on some of those retailers, I think that's where you're going to see a lot more [opportunity]( in this inflationary environment and not necessarily buying shares of Target or Walmart or even Amazon right now. Zach thinks people are going to start substituting their Walmart runs for cheaper alternatives like Dollar General or TJ Maxx, as penny-pinching constraints on the average consumer changes their buying habits. Might be a good time to hop on this trend. In the meantime, get the full rundown on dealing with price inflation with productive investments with Zach Scheidt, [by clicking here](. Follow your bliss, [Addison Wiggin] Addison Wiggin Founder, The Wiggin Sessions P.S. P.S. A chart from the New York Fed: [Click here to learn more] Look at 2008 in comparison to now: a huge chunk of mortgages today are only given out to those with credit scores of 760 or higher. Did we learn our lesson from the sub-prime mortgage crisis? Or are we just getting swindled again, but this time with sexier numbers? --------------------------------------------------------------- Ex Goldman Managing Director: “Stocks are completely disconnected from reality!” [Click here to learn more]( [A strange phenomenon]( is ‘distorting’ America’s financial system. It has nothing to do with a pandemic, or inflation. It won’t be like the crashes we saw in 2000… 2008… or even 2020. In fact, the next crisis won’t be a crash at all. Don’t get caught off guard by what will happen next. [Watch PhD Nomi Prins’ bombshell prediction for America’s economy by clicking here now](. Ed. note: Got something to say? 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