Wal-Mart profits increasing despite slump in economy

By Michael Logli

Consumers may be suffering because of the state of the economy, but for Wal-Mart locally and nationally, the recent slump has had little effect.

According to a company letter sent by Tom Schoewe, executive vice president and chief financial officer of Wal-Mart, the company reported sales of $106 billion for the most recent quarter, making it the first retailer to have sales exceed $100 billion. However, the company has more conservative views for the current quarter, expecting a growth no larger than 2 percent.

Marty Skelton, co-manager of Champaign’s Wal-Mart at 2610 N. Prospect Ave., said the economic drop has not affected business as a whole.

Instead, confounding factors such as gas prices and bad weather have hurt certain areas of business, such as the garden center. Skelton said a shortage in sales in one department has so far been covered by increased sales in another, resulting in little to no loss in profit or productivity.

“The dollars are there; it’s just different weekly,” Skelton said.

Yet across the street on 2032 N. Prospect Ave., Dots, a clothing store specializing in affordable women’s fashions priced from $5 to $20, has not experienced Wal-Mart’s success. According to Associate Manager Denea Beate, Dots in Champaign has lost between $3,000 and $4,000 in the last month, though it has made a profit over the last year.

“We haven’t been accomplishing our sales goals lately,” Beate said, referring to recent daily sales reports.

Even though both stores pride themselves on affordability, the difference in profit between the two has several explanations.

Anne Villamil, economics professor at the University, said Wal-Mart’s success over other retailers could be attributed to its overall share of the market or its public announcement of low prices through advertisements.

“Even in a declining market, more people could shop there,” Villamil said. Which means that since consumers already know Wal-Mart has low prices, they would be more eager to shop there during a recession.

However, Wal-Mart’s success could actually hurt the market if it did not continue to expand as well. If other companies exited the market and their former employees remained jobless or were hired for lower wages than they previously earned, Villamil said the economy would still continue to decline.

A declaration of recession is usually a retrospective decision, and Villamil said the definition of a recession and the various numbers are changing.

However, at a growth rate of roughly 0.6 percent, Villamil believes the economy to be undoubtedly sluggish. Whether businesses like Wal-Mart will hurt or help the American economy is still uncertain.

“A GDP growth of less than 1 percent is anemic,” Villamil said.