Shop Talk

Retailers, consumers and prices

30 minutes with Wal-Mart’s CFO

August 13, 2009

schoeweAfter Wal-Mart (which is now calling itself Walmart) reported quarterly results, the media was given about half an hour to ask its Chief Financial Officer Tom Schoewe (pictured at left) questions.

We asked about its quarterly results, how back-to-school is shaping up (and for that matter, what about Christmas?), how are consumers faring and what about this call for employer mandated health care coverage?

Here are his answers to some of our questions (Most of the questions have been paraphrased):

Q:How were you able to post earnings per share at the top end of your forecast range while sales came in lower than expected?

“We’ve talked over time about the importance for us to manage inventory. Obviously, when you’re missing your sales expectations that becomes even more challenging than ever. This quarter Eduardo Castro-Wright and his team managed inventory well below the change in sales and that just allows you to operate a far more efficient business – there’s less clutter in the store, we have less in the way of inventory shrinkage, we have less in the way of merchandise mark downs.”

Q: How are consumers holding up? What are you seeing in terms of the paycheck cycle — when Walmart sees its sales decline as shoppers run out of money in between paychecks?

We still see that … pronounced paycheck cycle. So it tells me that our customer remains under a significant amount of pressure. … The trend that we’ve seen away from credit … that trend continues. You see less in the way of credit, more in the way of cash and debit.
… Many of our customers receive food stamps, welfare, other forms of government assistance. On the first of the month their
EBT card would be charged, and we can see literally real-time once the clock strikes midnight and EBT cards are charged, you can see our results start to tick up.”

Q: Can you provide any forecast for the year-end holidays?
“It’s hard to say. I think it’s going to depend a lot on consumer sentiment right at the time. What we’re doing right now is our best to buy the kinds of things that we think are the best value.

… Let’s face it, this Christmas, probably more so than in the past, I think you’re going to see customers really looking for value. I think Christmas will be just fine.”
Q: Do you think it’ll be somewhat better than last year given how quickly things fell apart so close to Christmas last year?

“I think last year was a very, very unusual time, and I’m hopeful they’ll be better than last year.”
Q: What are you seeing in back-to-school shopping, and what might that tell us about how parents will spend for Christmas?
“For any seasonal event, shopping happens closer to the event. We’re seeing that in back-to-school. We saw that last year at Christmas. My guess is as we motor toward Christmas this year, you’re going to see people putting off their spending right until the end and looking for just the best value. 

… On back-to-school, what I would tell you is the calendar is not always the same, and back-to-school at this point this year is a little bit later just because of the calendar when schools are starting … but we’re right in the middle of back-to-school now, and what I would tell you is we feel `mpretty good about our position in back to school.”

Q: Does Walmart, with its support of employer mandated health care coverage, believe the cost of health care should be spread around to many employers?
“We think that’s the most effective way for the nation to grapple with the issue at hand, which is costs are rising at a very rapid rate and the more people that are included, the easier it would be to leverage costs.

The  reason that you saw us weigh in … really just speaks to the need to get as many people covered as we can. One of the main reasons that health care costs are so high is that there are 45 or 47 million Americans that don’t have any insurance and the cost of their health care gets spread across everybody else, so as you increase that base, you have a better chance to leverage expenses.”

(Photo: Reuters)


But that’s the point! Right now health-care is completly private with the exception of medcare and medicaid. The individual cannot afford insurance on their own because there is no competition mandated in the market. Insurance companies can charge any premiums they see fit, then tell you what doctor you can see. My premiums went up twice this year and there was not a thing I could do about it unless I wanted to pay my premiums completely out of my own pocket (no pay-in from my employer) for another insurance company. There has to be some sort of oversight to this process. If the private market itself will not do it, then it’s up to the government to step in and protect the citizen. This has happened before in other industries. I’m sure it will happen again. This doesn’t mean the government will control healthcare. It will simply make sure the average citizen doesn’t get fleeced by big business (like walmart). I find it interesting that walmart wants to speak out about this when they keep most of their employees from working full-time so that they don’t have to pay out for health benefits.

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