Big Trouble For Big Discounters

By Matt Pillar, chief editor

It’s high-profile news that mighty Walmart is suffering through slumping store traffic and stock performance. Last month, the giant even replaced President and CEO of U.S. stores Bill Simon in its effort to shrug off five consecutive quarters of disappointing results.

New chief of the U.S. division of Walmart Greg Foran has his work cut out for him. To assume Walmart’s struggles are purely internal is to ignore the bigger challenges faced by the U.S. discounter. It’s well-reported that Family Dollar cut jobs, closing nearly 400 underperforming stores and made permanent price cuts on about 1,000 basic items in advance of its acquisition by Dollar Tree last month. Dollar General has also consistently struggled with sales and reduced its profit outlooks.

Most analysts agree that the plight of the U.S. discounter is rooted in low-income consumers that are having a hard time with perennially high food, gas, and home energy costs.

Meanwhile, a bevvy of higher-end brands are having banner years. Fossil, Macy’s, Michael Kors, Nordstrom, and Tumi are among those posting high-flying figures of late.

Clearly, using the flagging economy as an excuse for excessive price competition is proving a race to the bottom.

It’s what many retail executives and experts are calling a bifurcation of the market, and it doesn’t bode well for the middle-to-low income brackets, the retailers who serve them, nor the economy in general.

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