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EDITORIAL: Caution: Wal-Mart's response to the status of the economy indicates that rough times could lie ahead.
(Journal-World (Lawrence, KS) (KRT) Via Acquire Media NewsEdge) Jul. 5--When the world's largest retailer begins to pull in its horns, it's time for everyone to take note.
Wal-Mart, long dedicated to growth and expansion, is reducing its capital spending forecast for fiscal 2009. Officials say the firm is slowing construction of supercenters in the face of a weakening United States economic environment.
The company says it expects to spend $13 billion to $14 billion during the fiscal year ending Jan. 31, 2009. Last October, Wal-Mart had said it planned to spend up to $15.2 billion.
Chief financial officer Tom Schoewe said the lower forecast "reflects Wal-Mart's ability to grow more efficiently with reduced capital expenditures." He says the company plans to moderate supercenter growth in the United States. In effect, that means somebody has been checking the cash drawer and doesn't see a good chance it will become overloaded in the near future.
The firm is big enough and flexible enough that it can adjust in an upward direction if there are improved conditions. The fact it is acting prior to a crisis indicates good management. But it also reiterates what a lot of financial experts such as Warren Buffett have been saying for some time: A status of recession exists and it may not dissipate soon.
Analysts say they are not surprised by the news. Schoewe told shareholders at the annual meeting earlier this month that capital spending would likely be at the low end of the projected range. This just reaffirms that cautionary declaration.
It also emphasizes that the American economy is struggling and probably will take quite a while to gain a more profitable footing.
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Copyright (c) 2008, Journal-World, Lawrence, Kan.
Distributed by McClatchy-Tribune Information Services.
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