Wal-Mart Sails Along in a Sinking Economy

Wal-Mart Stores, Inc. is on the upswing despite a struggling economy that is causing consumers to cut back on spending and retail chains to struggle to remain afloat while thousand continue to lose jobs.

Finding success
A week after retailers Best Buy and Starbucks announced more store closings and layoffs to come, Wal-Mart reported that their earnings for the third quarter rose 9.8 percent while sales increased 7.5 percent.

Stores that had been in business for at least a year reported a 3 percent increase in sales – that's twice as much as earnings during the previous year, and much more impressive than almost every other U.S. retailer.

Wal-Mart bounces back
This pattern is largely because of the economic downturn. As consumers seek cheaper products and weaker retailers end up closing up shop, Wal-Mart continues driving down prices, undercutting competitors and squeezing costs from other suppliers.

Tom Schoewe, Wal-Mart's chief financial officer explained, "Our balance sheet is actually stronger than a year ago. If you think of the environment we are in, there are very few people who can say that."

It seems as if the souring economy has resurrected Wal-Mart just as its dominance was being threatened by lower returns on its bigger than life expansion formula, more selective consumers and a growing list of competitors. Now the company's size is its advantage.

Wal-Mart power
According to Michael Niemira, chief economist at the International Council of Shopping Centers, for every dollar spent on goods other than cars last year, 8.2 cents went to a Wal-Mart store or Sam's Club, the company's warehouse chain.