Commentary

On The Street: Wal-Mart's Up; Facebook's Out There

The bribery investigations at Wal-Mart headquarters may be widening, as the New York Timesreports, but the results at Walmarts’ stores certainly cheered up executives in the C suites and boardroom yesterday. Profits rose 10.1%, beating analyst’s estimates. They credited its low-price promotions with luring “thrifty shoppers back into its U.S. stores,” as Shan Li puts in the Los Angeles Times

"Our overall performance reflects the success of Walmart’s business model," says CEO Mike Duke in a statement. "We believe that the momentum throughout our business positions us very well for the rest of the year."

It was the third quarter in which sales rose after nine straight quarters of decline.

“A refocus on the basics led apparel comparable sales to rise in the middle single-digit rate, the first increase in six years,” Andria Cheng reports for MarketWatch. “Home goods also saw higher sales. While grocery inflation has moderated slightly to about 3%, the company said customers are still trading down to cheaper products and smaller pack sizes.”

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Reuters’ Jessica Wohl points out that the rebound follows the retailer’s “reversal of its inventory reduction plan after shoppers headed elsewhere to find goods not on Walmart shelves.”

Walter Stackow, a senior research analyst at Manning & Napier, tells Wohl that “the turnaround they initiated several quarters ago is starting to show some benefit, it's starting to gain traction. But at the end of the day, it is still a very challenging backdrop for them." 

The potential woes include the stagnant economy, joblessness and the competition from dollar stores and online retailers. 

Adding to Walmart’s sunny day, Nate Ryan reports in USA Today that Dale Earnhardt, Jr., signed autographs at a Diet Mountain Dew appearance at a Walmart in Huntsville, S.C., last week.But you don’t have to pay him to get him through the portals, he says.

"When you can't sleep or want to get a midnight snack or some fast food, you just cruise over to the Walmart and walk up and down the aisles," Earnhardt tells Ryan. "They're always coming out with stuff. When else do I get the chance to get in there and see what's new?"

The love is mutual, as you might imagine. Some of the products Earnhardt might have viewed over the years include the No. 88 adjustable cap with “vintage look and feel,” the exclusive Hot Wheels collection, and the #88 Crystal Logo 18" Necklace, among other gewgaws.

Hey, before we go, did you hear that the Facebook IPO is today? How could you not … it has been a major story in just about every business section for weeks.

Well, just as individuals are being advised that they ought to think long and hard before “getting roughed up in an ugly scrum of rabid amateur investors,” marketers are being cautioned about getting too exuberant about the benefits of social media for advertising. 

GM’s dropping its Facebook advertising earlier this week garnered extensive coverage, of course. (Reuters is reporting that the decision came after a recent meeting in Menlo Park where Facebook executives focused more on “touting the social networking website's free pages,” which “kind of backfire[d] on them.) And take a look at Laurie Sullivan’s “Facebook Needs Open Ad-Targeting Formats To Succeed” in Wednesday’s Online Media Daily.

Then there’s Ed Keller (with whom I’ve had many face-to-face conversations, I should disclose) and Brad Fay’s new book, which is to be published Tuesday: The Face-To-Face Book: Why Real Relationships Rule in a Digital Marketplace. Marketers are advised that social media “represent just a very small fraction of the much larger universe of word of mouth conversation about products, services and brands” and that companies make a big mistake by “putting social media at the front of the planning process rather than utilizing it as a channel on the strategy have been determined.”

The authors liken the frenzy to the Gold Rush out West in the 19th Century, “which made a few people fabulously rich. But many people went chasing the gold and lost everything. Similarly with social media, a few people will hit the motherlode and hit big, but many will wonder what happened and why they didn’t get the results they were expecting.”

Dig? That, of course, is always the question.

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