To Spend Is to Tax
Notes for a Talk on Teaching the Very Basics of Monetary Policy...


No sooner do I hear people say "Where is the slowdown in consumer spending?" then this comes over the wire:

Wal-Mart Outlook May Damp Holidays As Retailers Post Mixed October Sales - By KRIS HUDSON: November 2, 2006 3:18 p.m.: Wal-Mart Stores Inc. predicted its November sales will show no gain over its results from the same month a year ago, signaling a weak start to the holiday season for the giant retailer as it struggles with an image overhaul and weak apparel sales.

Wal-Mart, Bentonville, Ark., on Thursday reported a gain in October same-store sales -- or sales at stores open for at least a year -- of 0.5% for its U.S. stores. That aggregate figure included a 2% gain by its Sam's Club membership-warehouse division and a 0.3% gain by its larger Wal-Mart Stores division of 3,200 supercenters, discount stores and Neighborhood Market grocery stores. The company's shares fell 1.8% to $47.97 in late morning trading on the New York Stock Exchange Thursday.

As shoppers bundled up in new clothes in the autumn chill, some major retailers were celebrating but others were left out in the cold. Chart data for a dozen major retailers and see highlights and lowlights from the past year.

Wal-Mart's announcement came as retailers posted a mixed sales performance for October, as consumers appeared to take a break from September's shopping spree.

Department stores and specialty chains posted some strong gains, helped by demand for coats, sweaters and other cold-weather gear amid one of the chillier October periods on record. Discount retailers, however, struggled, as lower-income shoppers have been slow to ramp up spending following an August drop in gasoline prices.

Wal-Mart logged global sales in October of $25.7 billion, up 11.7% from October 2005. Its core Wal-Mart Stores division notched a 7.7% gain to $16.6 billion in sales. Sam's Club posted $3.1 billion in sales, a 1.2% gain. And Wal-Mart's more than 2.700 international stores posted $6 billion in sales, up 32.1%.

Wal-Mart blamed the weak October showing on difficulty surpassing its 4.7% gain from October 2005, which was fueled by shoppers in the Southeast stocking up on goods in the wakes of Hurricanes Katrina and Rita. To that point, Wal-Mart said that, factoring out the hurricane-influenced stores in the Southeast, the balance of its stores posted a cumulative 1.7% same-store gain last month. Its strongest regions last month were in the Rocky Mountains and the Midwest....

"Price rollbacks on key toys that went into effect in mid-October generated significant lift in unit volume," Chief Financial Officer Tom Schoewe said in a release issued Thursday. "In electronics, another dynamic category for the holiday season, we have several initiatives planned to drive holiday sales. We have expanded our brand offerings, improved our product presentations in the store, reinforced our value pricing and doubled the assortment of accessories."...

Yet Wal-Mart's October same-store gain was its lowest since December 2000. And the retailer predicts its November gain to fall even lower than that, only matching its sales from November 2005. That bar is set relatively high by the 4.7% gain the retailer posted a year ago.

"November's outlook for only flat same-store-sales is disturbing provided the expected [same-store sales] lift from the company's remodeling program and $4 generic drug program," JP Morgan Securities analyst Charles Grom said, referring to Wal-Mart's program to offer 30-day prescriptions of some generic drugs for $4 in 27 states. "Moreover, provided the continued weakness in apparel sales, largely womens, we remain concerned that Wal-Mart's upcoming holiday could be weaker-than-expected"...