Wal-Mart: Deeper in the Black, Thanks to the Supply Side

Considering the recent challenges of the retail sector -- and the increasing danger signs for the U.S. economy -- I was pleasantly surprised to see last week that Wal-Mart's profit rose 7.9 percent based on tight control of costs. According to an article in the The Wall Street Journal, Wal-Mart "said that tight controls on costs and inventory fueled a better-than-expected fiscal third-quarter profit and that it has 'set the stage for a successful fourth quarter,' despite mounting economic worries for its lower-income shoppers." Clearly, Wal-Mart's constant hammering of suppliers for cost reduction -- which they are famous for sharing with their customers -- is playing a major part here. The article notes that "last month, it cut prices on more than 15,000 items" and that "its supercenters have widened the gap this fall between their food prices and those at traditional grocery stores as costs for commodities, including dairy products, continue to rise." If there was ever a category killer which based 90 percent of its overall corporate strategy on Spend Management, it's Wal-Mart.

Jason Busch

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