It’s hard to imagine a business as inextricably linked with the American economy as Wal-Mart being in danger, but the numbers aren’t good for one of the country’s largest retailers. The big-box giant’s stock was recently downgraded from Buy to Neutral by investment bank Goldman Sachs, worrying many who thought Wal-Mart’s recent declining quarterlies were just an anomaly. Unfortunately, this doesn’t seem to be the case, and Goldman Sachs explained that customers were abandoning Wal-Mart en masse.
Analysts have looked high and low for market forces to blame for Wal-Mart’s sharp decline, though none can quite agree on where the major problem lies. One theory is that Wal-Mart and other stores like it are losing the majority of their business to online retailers like Amazon. Another says customers are increasingly in search of more focused retailers, favoring specialty stores over big box discounters.
Of course, it’s easy to get carried away with all of this talk of doom and gloom. The truth is that Wal-Mart is a long way from going the way of the dodo. The international behemoth brings in more than $450 billion in annual sales, so don’t expect to see the store disappear from cities overnight the way Blockbuster has. Still, there’s no denying the stark truth of the numbers. The retailer has seen slipping sales figures for five consecutive quarters, and that’s the kind of thing no investor likes to hear.
It’s impossible to overstate the effect a declining Wal-Mart could have on the country’s economy. Millions of Americans depend on the store not just for employment but for prices that make life easier on the middle class. Unfortunately, the Obama administration continues to make things difficult for big businesses like Wal-Mart. Still pushing for a federal minimum wage increase to $10.10, Obama risks devastating the profits of big discount stores like Wal-Mart that depend on minimal wages to keep their prices low. One estimate predicted that such a minimum wage hike would add nearly $2.5 billion in annual costs to the company.
To be certain, the prospect of a higher minimum wage isn’t what’s causing Wal-Mart’s declining sales, but it underscores the importance of having people in Washington who believe in helping American businesses succeed. With tax breaks, beneficial laws, and limited regulation, politicians from the president on down can make America a place where corporations can succeed.
Even if the company posts declining sales for the next five years running, Wal-Mart probably isn’t going anywhere. Not that its continued dominance is a given, but it will take a long time for a company that mighty to fall completely off the perch. Hopefully, they will figure out what it takes to compete in a new kind of marketplace long before that happens. If we can put someone in office who believes in free market capitalism, we can at least make sure that if Wal-Mart does go obsolete, it will be because customers moved on and not because of unfair government regulations.
