Walmart: “Doing Fine, Thank You”

Carolyn Piedmont buys a loaf of bread the way a collector would an antique.

With reading glasses on her nose, she stands in the bread aisle sizing up candidates: Milton’s Multi-Grain: $2.75. Orowheat 100% Whole Wheat: $3.10. Nature’s Own Honey Wheat: $2.38. Nature’s Own Honey 7-Grain Whole Wheat: $1.91.

She grabs one, then another. Mouthing the ingredients, she calculates the figures while ignoring the on-again, off-again Walmart intercom announcing store sales and discounts.

“I go to other stores just to double-check prices,” she says, beside her grocery cart stocked with health foods staples like yogurt and protein shakes.

Piedmont says she always shops at Walmart.

Today, she narrows the choice to two: Nature’s Own Honey Wheat or Nature’s Own Honey 7-Grain Whole Wheat. She adjusts her glasses and picks up another loaf.

Customers Face Tough Choices

With the economy slumping, customers like Piedmont are shopping at Walmart in record numbers.

One customer, Richard Harris, says he just started shopping at Walmart, though he swore he’d never.

“I’d rather pay $100 for something good one time then buy the same piece of crap five or six times,” says Harris, a carpenter who recently retired to care for his wife recovering from a car accident and a mother suffering from Alzheimer’s Disease.

Harris rarely shops in the produce section, however.

“You never know what you get in your food,” he says, adding that he analyzes food products from the store with a lead-testing kit.

Still, Harris says he is now a consistent–though “conflicted”–Walmart shopper. He credits his retirement and failed investments as the reason.

Company Stock, Profits Rising

Walmart has done well in the last year. Not only in store sales, but in stock value.

Walmart shares are up almost 40% since October of last year, while the S&P 500 and the Dow Jones are both down more than 20%–a sign customers are flocking like never before to the store’s “low, low prices,” especially on food.

“Walmart’s food prices are estimated to be anywhere from 8-27% lower than large supermarket chains for an identical market basket across different U.S. metropolitan areas,” according to researchers Elena G. Irwin and Jill Clark at Ohio State University in their article “The Local Costs and Benefits of Walmart.”

And customers have responded by increasing Walmart profits from last year.

“Net sales for the second quarter of fiscal year 2008 were approximately $101.6 billion, an increase of 10.4 percent from $92 billion in the second quarter last year,” according to a press release issued by Walmart in September 2008.

Lee Scott, president and chief executive officer of Walmart Stores, Inc., during an in-house video interview on Walmart.com, said that even though consumers are reallocating their pocketbook and leaving non-essentials on the shelves, the relationship between Walmart and its customers has grown closer.

“We’ve made our decision to manage our capital a little closer to the vest, at the same time that the customer is having to manage their own lifestyle to the vest and the two things are matching up,” said Scott.

Choices Differ Among Customers

Jay Esperaza and Claudio Alvarado, two undergrads from the University of Texas at Austin, are at Walmart today to buy paint for their living room table. At first, Esperaza suggested they go elsewhere: “Hey, let’s go to Home Depot,” he told his roommate. Alvarado was hesitant. Instead, he convinced his friend to shop at Walmart, knowing it would save the two money. (The Home Depot in question closed its doors a week later).

Esperaza agreed, though he says he prefers not to shop at the superstore. “You have to weigh price vs. quality vs. service,” he says. This time price won out.

“[Walmart’s] a drain on the local economy,” Alvarado admits. “But it’s handy when you don’t have a lot of money.”

Not all customers are turning to Walmart to save money, however.

Kirk Manolis, a weekly patron at Fresh Plus Grocery, a small family-owned grocery in Austin, Texas, says he considers himself a “socially conscious person” and refuses to shop at Walmart for a variety of reasons.

Kirk, an upper-middle class securities trader who has profited in the last year as a short seller, says Walmart is run by “rightwing nuts” and regardless of finances, he would never shop at the retailer.

“Not unless they nationalize it and relocate business to North America,” he says, buying milk at the mom-and-pop within walking distance of his house. “And no more teaching republican politics in staff meetings.”

Fresh Food Plus, Kirk’s grocery of choice, has still been profitable in the last year, even with more customers turning to Walmart for food purchases, says Irene Beurskens, storeowner.  She says nearby customers save money in ways other than direct purchases.

“They’re saving money that they would have spent on gas,” she said, adding that many customers ride scooters or bicycles and park out front. Others just walk like Manolis.

Still, like elsewhere, prices at the store are going up to offset rising wholesale costs, says Randy Sexton, grocery manager, carrying a handful of printouts listing the new price of bananas (up 10 cents) and a six-pack of Blue Sky soda (up 50 cents).

More Profit for Walmart, Analysts Say

In a September 2008 article, the S&P-owned online magazine “Outlook” recommended Walmart stock to subscribers as a short-term investment option. “Consumers will continue trading down to lower-priced retailers [in the coming year],” according to the article.

Piedmont sees the trend in her own life. “I had friends who were Walmart snobs,” she says. “Now they don’t shop anywhere else.”

But Piedmont takes offense to the perception that Walmart only caters to low-income customers. She says she has built up her “healthy savings” thanks in part to buying at Walmart and would recommend the choice to any frugal shopper, especially one in financial trouble.

“We got money,” she said. “I’m a wise shopper. And that’s why.”,