Retail Expert Davidowitz: Wal-Mart's Woes Stem From Economy in 'State of Collapse'

Thursday, 15 Aug 2013 01:28 PM

By Dan Weil

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Wal-Mart issued weak earnings news Thursday, but the company isn't doing anything wrong, says Howard Davidowitz, chairman of retail consultant Davidowitz & Associates. It's merely suffering from a weak economy.

"Wal-Mart is a terrific operator," Davidowitz tells Yahoo. "They didn't suddenly become stupid. ... The economy is in a state of collapse. That's what's going on."

The world's biggest retailer cut its full-year profit forecast after second-quarter profit came in below analysts' expectations.

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The employment situation illustrates the weakness of the U.S. economy. Of the new jobs generated this year, 75 percent are low-wage, part-time, Davidowitz explains.

Real unemployment, including those who have stopped looking for work and are working fewer hours than they want, is 14 percent, he adds.

"Business is bad in America," Davidowitz notes. "Look at our GDP [gross domestic product] growth. We're growing at 1.5 percent. That means we can't produce jobs."

The economy expanded at an average rate of 1.4 percent in the first and second quarters.

"I don't think we're in a recession right now, but I think there's a 50 percent chance we'll be in a recession next year," Davidowitz predicts.

Meanwhile, government debt has exploded to $17 trillion, he notes. "We've spent all the money, we've borrowed all the money and we're in the tank."

To be sure, some experts say Wal-Mart is responsible for its own difficulties. Brian Sozzi, chief equities strategist at Belus Capital Advisors puts the blame on Wal-Mart's activity overseas and in e-commerce.

"Investments to address international, from uncompetitive prices and poorly laid out stores, continue with no visible sign they are driving improved results, while the company is pouring large sums of money into e-commerce to compete with Amazon," he writes in a report obtained by Business Insider.

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