Wal-Mart's glum forecast mirrors economy
NEW YORK — As the fortunes of many Americans go, so goes Wal-Mart, so goes the economy.
Even as the world's largest retailer on Thursday reported an 8.6 percent rise in fourth-quarter profit during the busy holiday shopping season, it offered a weaker forecast for the coming months. The problem? The poor and middle-class Americans who shop at Wal-Mart — and who are big drivers of spending in the United States — are struggling with rising gasoline prices, delayed income tax refunds and higher payroll taxes.
It's widely known that Americans in the lower income brackets continue to struggle, even as higher earners benefit from improved housing and stock markets, but Wal-Mart's results signal that matters may be getting worse for the nation's poor and middle class.
Wal-Mart is the latest in a string of big-name companies from Burger King to Zale to say those Americans are being squeezed by new challenges. Since Wal-Mart accounts for nearly 10 percent of nonautomotive retail spending, it is a bellwether for the economy.
“Wal-Mart moms are the barometer of the U.S. household,” said Brian Sozzi, chief equities analyst at NBG Productions who follows Wal-Mart. “Right now they're afraid of higher taxes and inflation.”
Indeed, while wealthier households have seen their stock portfolios grow, poor and middle-class Americans have struggled to regain their financial footing since the recession ended more than 3½ years ago.
Stocks have nearly doubled since June 2009. Dividends and capital gains from stocks, which disproportionately benefit higher-income Americans, are taxed at lower rates compared with ordinary income.
While incomes for most Americans have failed to keep pace with inflation since the recession, that's been particularly true for middle and lower-income earners.
Another hurdle for lower- and middle-income Americans has been the jump in gasoline prices since mid-January. The average price for a gallon of gas rose 47 cents in the past month to $3.78 on Thursday, according to AAA.
Tax changes also have hit the nation's lowest earners especially hard. On Jan. 1, Social Security payroll taxes rose 2 percentage points after a temporary reduction expired. That sliced about $1,000 from the take-home pay of a household earning $50,000.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Stock market closes 2nd best week of 2014
- Beacons track shoppers’ smartphones amid retailers’ aisles
- 8 Western Pennsylvania hospitals penalized over infections
- Pennsylvania jobless rate drops to 5.1 percent
- First Niagara to cut 200 jobs; Pittsburgh impact unclear
- Alcoa buying jet engine components maker Tital to help expand aerospace unit
- Western Pa. utility workers OK contract with FirstEnergy
- Nonprofit hospitals in Western Pa. feel pain in finances despite Affordable Care Act
- Natural gas groups says increase in Pennsylvania taxes would bring dire results for economy
- Harmar developer sells 15 hotels in Western Pa., West Virginia
- Hospital finances still crying ‘ouch’