There is no denying that Walmart is a juggernaut. It’s the largest corporation in the world and employs 1.5 million Americans, making it a top employer in the country.
While it’s been celebrated and criticized, the giant retailer is a barometer for how the US economy is doing. Far from perfect, but Walmart is a metric to help predict when stocks are headed towards a recession or boom.
A Little History of Walmart’s Growth
The company’s sales growth rivals the GDP (gross domestic product) growth of the US, which was $17.9 trillion in 2010 and reached $17.4 trillion in 2011, a 4% change year-over-year. In the first quarter of 2013, GDP growth was reported at 2%, according to the Bureau of Economic Analysis (BEA).
But the company’s growth is not just about its sales numbers. If Walmart’s revenue rose another 67%, it would surpass the US GDP.
In addition, the retailer’s estimated quarterly revenue rose 8% year-over-year in 2012 and 5% in 2011. This is a positive sign for retailers, as consumers bought more goods and services than they had.
Walmart as a Barometer for the US Economy Today
When Walmart does well, it can signal economic prosperity. But when it does poorly, it can tell us something about consumer confidence and shrinking consumer power.
“Walmart is a good leading indicator for consumer confidence,” said Janney Capital Markets analyst David Strasser. “When Walmart invests in new stores, consumers have money and confidence to do that. If they build fewer stores, consumers are weary of spending, which can be an indicator. The overall economy is softening.“
That was the case in Q3 2013 when Walmart’s sales were soft. This can be attributed to the government shutdown and debt crisis in Washington. Because the country began to be consumed with political battles, consumers had less confidence in spending.
How’re we looking?
Walmart’s quarterly revenue growth indicates that a recession may not be far off. In three of the past four quarters, Walmart’s revenues have risen by less than 4%. That’s not a very strong showing. When comparing revenue growth to GDP growth and consumer confidence, we can safely say that any numbers under 4% for Walmart indicate a slowing US economy.
In the most recent quarter, Walmart’s sales increased by less than 1.6%, GDP growth was 2%, and consumer morale rose by 3.3%.
Walmart Current Performance (2022) & It’s Indication
Walmart isn’t getting a lot of love these days. The company reported its slowest quarterly sales growth since 2009 in its second fiscal quarter, which ended April 30.
According to the company’s fiscal fourth-quarter results, Walmart’s revenue increased by less than 2% year-over-year, while its net income declined by 3%. Moreover, the company expects a drop in full-year profit.
In large part, the company’s disappointing performance can be attributed to the government shutdown and debt crisis in Washington. At the time, consumer confidence was low, and Walmart shoppers were not spending.