Walmart has been taking a beating lately. After caving to public pressure and raising its minimum wage in April, the company announced a 10% decline in earnings per share by its third quarter. Earnings are projected to decline another 6-12% next year.
The pain there was self-inflicted, but the latest news from the nation’s largest employer may be a sign of economic troubles ahead. As CNN Money reported:
Walmart said it will close 269 stores in 2016, as the mega-retailer tries to revitalize its slumping finances.
The company said the stores it plans to close are generally poor performers, and most are within 10 miles of another Walmart. 154 of the locations are in the United States, two-thirds of which are the smaller “Walmart Express” stores. Only 12 U.S. Walmart Supercenters will close, along with four Sam’s Club stores.
Of the 16,000 associates — or employees — to be affected, 10,000 will be in the United States. The company aims to place those associates in nearby Walmarts.But when that’s not possible, Walmart said it will provide the laid-off associates with 60 days worth of pay as well as resume and interview skills training. The retail sector struggled mightily, and shares of Walmart fell 30%, last year.
If a company built on catering to the masses through low prices is struggling, more bad news may be to follow in the rest of the nation. Walmart’s stock has a Beta of 0.38 – which in layman’s terms means that it’s only 38% as volatile as the market as a whole. If a company that’s relatively stable is suffering to this extent, its a bad sign for the more volatile.
2016 is going to be a tough year for the economy. Analysts are predicting a 44% chance that we fall back into recession this year.
At least we’ll soon have a new president to deal with it.
[Note: This article was written by the Analytical Economist]