Monday, April 4, 2011

Walmart (WMT) CEO: "Inflation is Going to be Serious"

While our friendly government statisticians continue to substitute and hedonically (is that even a word?) adjust away nearly all forms of inflation in their propaganda figures [Dec 16, 2010: - Inflation as Measured in the 1980s Would be 8%+, as Measured in 1990: 4%] the head of a the company that churns through 1 of every 10 U.S. retail dollars peeks not the future supply chain and says otherwise.

As in 2008, it will only matter to the market when it matters.  And not a moment sooner.

  • U.S. consumers face "serious" inflation in the months ahead for clothing, food and other products, the head of Wal-Mart's U.S. operations warned Wednesday.   The world's largest retailer is working with suppliers to minimize the effect of cost increases and believes its low-cost business model will position it better than its competitors.
  • Still, inflation is "going to be serious," Wal-Mart U.S. CEO Bill Simon said. "We're seeing cost increases starting to come through at a pretty rapid rate."
  • Along with steep increases in raw material costs, John Long, a retail strategist at Kurt Salmon, says labor costs in China and fuel costs for transportation are weighing heavily on retailers. He predicts prices will start increasing at all retailers in June.
  • "We're in a position to use scale to hold prices lower longer ... even in an inflationary environment," Simon says. "We will have the lowest prices in the market."
  • Major retailers such as Wal-Mart are the best positioned to mitigate some cost increases, Long says. Wal-Mart, for example, could have "access to any factory in any country around the globe" to mitigate the effect of inflation in the U.S., Long says.  Still, "it's certainly going to have an impact," Long says. "No retailer is going to be able to wish this new cost reality away. They're not going to be able to insulate the consumer 100%."

[May 13, 2008: News of the Day - Inflation]
[May 22, 2008: Bill Gross - Inflation Underplayed]
[Jan 5, 2011: [Video] ABC News - Consumer Reports Showing People are Paying for Less]

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