Category Archives: Uncategorized

Walmart’s Q4 2018 Results – Comments

I found various notable items in Walmart’s Q4 2018 management call transcript (pdf) dated February 20, 2018.  (as well, there is Walmart’s press release of the Q4 results (pdf) and related presentation materials)

I view Walmart’s results and comments as particularly noteworthy given their retail prominence and focus on low prices.  I have previously commented on their quarterly management call comments; these previous posts are found under the “paycheck to paycheck” tag.

Here are various excerpts that I find most notable:

comments from Doug McMillon, President and CEO, page 1, wrt Walmart U.S.: 

For the quarter, Walmart U.S. delivered strong comp sales growth of
2.6 percent due primarily to improved comp traffic growth in stores of 1.6
percent. Strength was broad-based across merchandise categories,
formats, and regions, and holiday sales were solid. In addition, comp store
inventory declined again for the eleventh consecutive quarter, so we’re
well-positioned as we begin the year. Sam’s Club comps improved 2.4
percent and in International, nine of eleven markets posted positive comp
sales. So overall, we were pleased with most aspects of the quarter and
confident in the foundational aspects of the business as we enter this new
fiscal year.

comments from Doug McMillon, President and CEO, page 2, wrt Walmart U.S.: 

Looking ahead, we expect eCommerce growth to increase from the
fourth quarter level as we enter the new year with about 40 percent growth
for the year.

comments from Doug McMillon, President and CEO, page 5:

Moving to Sam’s Club, you will remember that we made a decision
to close 63 Sam’s Club locations in the U.S. We’ve talked about
transforming the Sam’s business, and part of this transformation means
managing the club portfolio to include clubs that are both financially viable
and that fit within the strategic framework for the future. Closing stores and
clubs is difficult. It’s obviously difficult for our impacted associates and there
is never a good time to do it. John and the Sam’s team are working to place
as many of them as possible at nearby locations. These closures will help
us run a healthier business.

comments from Brett Biggs, EVP & CFO, page 8:

Before we get to the results, I’d like to highlight some
accomplishments for the full year.
 Total revenue surpassed $500 billion for the first time and increased
$15.1 billion, or 3.1 percent in constant currency.
 Walmart U.S. comp sales grew 2.1 percent – the highest growth rate
since fiscal 2009 – led by traffic growth of 1.4 percent.
 Walmart U.S. eCommerce sales grew 44 percent, reaching $11.5
billion.
 We made good progress on expenses, especially in Walmart U.S.
stores and International. Without the discrete items mentioned in
arriving at adjusted EPS, we would have leveraged expenses.
 Adjusted EPS increased 2 percent.
 Operating cash flow was $28.3 billion.
 The company returned $14.4 billion to shareholders through
dividends and share repurchases, and
 Strong working capital improvements continued.

comments from Brett Biggs, EVP & CFO, page 9:

Consolidated gross profit margin declined 61 basis points.
Approximately two-thirds of the decline was driven by price investments in
certain markets and the mix effect from our growing eCommerce business.
The remaining one-third was driven by Sam’s Club inventory markdowns
associated with closures, and other international items, including the winddown
of our Brazil first-party eCommerce business. Looking ahead to fiscal
2019, we’ll continue to make investments that will pressure the rate some,
but not to the extent of this quarter.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2727.56 as this post is written

Charts Indicating Economic Weakness – February 2018

U.S. Economic Indicators

Throughout this site there are many discussions of economic indicators.  At this time, the readings of various indicators are especially notable.  This post is the latest in a series of posts indicating U.S. economic weakness or a notably low growth rate.

While many U.S. economic indicators – including GDP – are indicating economic growth, others depict (or imply) various degrees of weak growth or economic contraction.  The Gross Domestic Product Q4 2017 Advance Estimate (pdf) of January 26, 2018 was 2.6%, and as seen in the February 2018 Wall Street Journal Economic Forecast Survey the consensus among various economists is for 2.8% GDP growth in 2018.  However, there are other broad-based economic indicators that seem to imply a weaker growth rate.  As well, it should be remembered that GDP figures can be (substantially) revised.

Charts Indicating U.S. Economic Weakness

Below are a small sampling of charts that depict greater degrees of weakness and/or other worrisome trends, and a brief comment for each:

Total Private Construction Spending

Various measures of construction continue to show weak growth and/or contraction.

“Total Private Construction Spending” through December had a last value of $963,247 Million.  Shown below is the measure displayed on a “Percent Change From Year Ago” basis with value 2.1%, last updated February 1, 2018:

TLPRVCONS Percent Change From Year Ago

source:  U.S. Bureau of the Census, Total Private Construction Spending [TLPRVCONS], retrieved from FRED, Federal Reserve Bank of St. Louis accessed February 9, 2018:

https://fred.stlouisfed.org/series/TLPRVCONS

Total Federal Receipts

“Total Federal Receipts” growth continues to be intermittent in nature since 2015.

“Total Federal Receipts” through January had a last value of $361,038 Million.  Shown below is  displayed on a “Percent Change From Year Ago” basis with value 4.9%, last updated February 12, 2018:

Monthly Total Federal Receipts

source:  U.S. Department of the Treasury. Fiscal Service, Total Federal Receipts [MTSR133FMS], retrieved from FRED, Federal Reserve Bank of St. Louis February 12, 2018:

https://fred.stlouisfed.org/series/MTSR133FMS

__

Commercial And Industrial Loans, All Commercial Banks

“Commercial And Industrial Loans, All Commercial Banks” through January had a last value of $2126.943 Billion.  Shown below is the measure displayed on a “Percent Change From Year Ago” basis with value 1.2%, last updated February 9, 2018:

BUSLOANS_2-9-18 Percent Change From Year Ago

source:  Board of Governors of the Federal Reserve System (US), Commercial and Industrial Loans, All Commercial Banks [BUSLOANS], retrieved from FRED, Federal Reserve Bank of St. Louis February 9, 2018:

https://fred.stlouisfed.org/series/BUSLOANS

__

Employment

I have written extensively concerning unemployment, as the current and future unemployment issue is of tremendous importance.

The consensus belief is that employment is robust, citing total nonfarm payroll growth and the current unemployment rate of 4.1%.  However, my analyses continue to indicate that the conclusion that employment is strong is incorrect.  Of particular note is the unemployment rate, which indicates that unemployment is (very) low.  Closer examination indicates that this metric is, for a number of reasons, highly misleading.

My analyses indicate that the underlying dynamics of the unemployment situation remain exceedingly worrisome, especially with regard to the future.  These dynamics are numerous and complex, and greatly lack recognition and understanding, especially as how from an “all-things-considered” standpoint they will progress in an economic and societal manner.  I have recently written of the current and future U.S. employment situation on the “U.S. Employment Trends” page.

While there are many charts that can be shown, one that depicts a worrisome trend is the Civilian Labor Force Participation Rate for those with Bachelor’s Degrees and Higher, Ages 25 and Above.  The current value as of the February 2, 2018 update (reflecting data through the January employment report) is 73.4%:

LNS11327662

source:  U.S. Bureau of Labor Statistics, Civilian Labor Force Participation Rate: Bachelor’s Degree and Higher, 25 years and over [LNS11327662], retrieved from FRED, Federal Reserve Bank of St. Louis, February 9, 2018:

https://fred.stlouisfed.org/series/LNS11327662

__

Productivity Measures

While I have expressed concerns about the overall definitions and value of productivity measures in the past, I do find the current-era trends to be disconcerting.

One such chart that shows a subdued level of a productivity measure is that of “Manufacturing, Real Output Per Hour.” Through the fourth quarter the last value was 109.101.  Shown below is the measure displayed on a “Percent Change From Year Ago” basis with value 1.1%, last updated February 1, 2018:

OPHMFG Percent Change From Year Ago

source:  U.S. Bureau of Labor Statistics, Manufacturing Sector: Real Output Per Hour of All Persons [OPHMFG], retrieved from FRED, Federal Reserve Bank of St. Louis February 12, 2018:

https://fred.stlouisfed.org/series/OPHMFG

__

Other Indicators

As mentioned previously, many other indicators discussed on this site indicate economic weakness or economic contraction, if not outright (gravely) problematical economic conditions.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2656.00 as this post is written

Average Hourly Earnings Trends

I have written many blog posts concerning the worrisome trends in income and earnings.

Along these lines, one of the measures showing disconcerting trends is that of hourly earnings.

While the concept of hourly earnings can be defined and measured in a variety of ways, below are a few charts that I believe broadly illustrate problematic trends.

The first chart depicts Average Hourly Earnings Of All Employees: Total Private (FRED series CES0500000003)(current value = $26.74):

(click on chart to enlarge image)(chart last updated 2-2-18)

CES0500000003

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Average Hourly Earnings of All Employees:  Total Private [CES0500000003] ; U.S. Department of Labor: Bureau of Labor Statistics; accessed February 2, 2018:

http://research.stlouisfed.org/fred2/series/CES0500000003

This next chart depicts this same measure on a “Percentage Change From A Year Ago” basis.   While not totally surprising, I find the decline from 2009 and subsequent trend to be disconcerting:

(click on chart to enlarge image)(chart last updated 2-2-18)

CES0500000003 Percent Change From Year Ago

There are slightly different measures available from a longer-term perspective. Pictured below is another measure, the Average Hourly Earnings of Production and Nonsupervisory Employees – Total Private (FRED series AHETPI)(current value = $22.34):

(click on chart to enlarge image)(chart last updated 2-2-18)

AHETPI

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Average Hourly Earnings of Production and Nonsupervisory Employees:  Total Private [AHETPI] ; U.S. Department of Labor: Bureau of Labor Statistics;  accessed February 2, 2018:

http://research.stlouisfed.org/fred2/series/AHETPI

Pictured below is this AHETPI measure on a “Percentage Change From A Year Ago” basis.   While not totally surprising, I find the decline from 2009 and subsequent trend to be disconcerting:

(click on chart to enlarge image)(chart last updated 2-2-18)

AHETPI Percent Change From Year Ago

I will continue to actively monitor these trends, especially given the post-2009 dynamics.

_________

I post various economic indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2772.85 this post is written

Consumer Confidence Surveys – As Of February 2, 2018

Doug Short had a blog post of February 2, 2018 (“Michigan Consumer Sentiment:  January Final Remains Favorable“) in which he presents the latest Conference Board Consumer Confidence and Thomson/Reuters University of Michigan Consumer Sentiment Index charts.  They are presented below:

(click on charts to enlarge images)

Conference Board Consumer Confidence

University of Michigan Consumer Sentiment

There are a few aspects of the above charts that I find highly noteworthy.  Of course, until the sudden upswing in 2014, the continued subdued absolute levels of these two surveys was disconcerting.

Also, I find the “behavior” of these readings to be quite disparate as compared to the other post-recession periods, as shown in the charts between the gray shaded areas (the gray areas denote recessions as defined by the NBER.)

While I don’t believe that confidence surveys should be overemphasized, I find these readings to be very problematical, especially in light of a variety of other highly disconcerting measures highlighted throughout this site.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2789.81 as this post is written

Markets During Periods Of Federal Reserve Intervention – January 31, 2018 Update

In the August 9, 2011 post (“QE3 – Various Thoughts“) I posted a chart that depicted the movements of the S&P500, 10-Year Treasury Yield and the Fed Funds rate spanning the periods of various Federal Reserve interventions since 2007.

For reference purposes, here is an updated chart (through January 31, 2018) from Doug Short’s blog post of January 31 (“Treasury Snapshot:  10-Year Yield at 2.72%“):

Periods Of Federal Reserve Intervention

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2823.81 as this post is written

Employment Cost Index (ECI) – Fourth Quarter 2017

While the concept of Americans’ incomes can be defined in a number of ways, many prominent measures continue to show disconcerting trends.

One prominent measure is the Employment Cost Index (ECI).

Here is a description from the BLS document titled “The Employment Cost Index:  what is it?“:

The Employment Cost Index (ECI) is a quarterly measure of the change in the price of labor, defined as compensation per employee hour worked. Closely watched by many economists, the ECI is an indicator of cost pressures within companies that could lead to price inflation for finished goods and services. The index measures changes in the cost of compensation not only for wages and salaries, but also for an extensive list of benefits. As a fixed-weight, or Laspeyres, index, the ECI controls for changes occurring over time in the industrial-occupational composition of employment.

On January 31, 2018, the ECI for the fourth quarter was released.  Here are two excerpts from the BLS release titled “Employment Cost Index – December 2017“:

Compensation costs for civilian workers increased 0.6 percent, seasonally adjusted, for the 3-month period ending in December 2017, the U.S. Bureau of Labor Statistics reported today. Wages and salaries (which make up about 70 percent of compensation costs) increased 0.5 percent, and benefits (which make up the remaining 30 percent of compensation) increased 0.5 percent. (See tables A, 1, 2, and 3.)

also:

Compensation costs for civilian workers increased 2.6 percent for the 12-month period ending in December 2017. In December 2016, compensation costs increased 2.2 percent. Wages and salaries increased 2.5 percent for the 12- month period ending in December 2017 and increased 2.3 percent for the 12-month period ending in December 2016. Benefit costs increased 2.5 percent for the 12-month period ending in December 2017. In December 2016, the increase was 2.1 percent. (See tables A, 4, 8, and 12.)

Below are three charts, updated on January 31, 2018 that depict various aspects of the ECI, which is seasonally adjusted (SA):

The first depicts the ECI, with a value of 131.4:

ECIALLCIV

source: US. Bureau of Labor Statistics, Employment Cost Index: Total compensation: All Civilian[ECIALLCIV], retrieved from FRED, Federal Reserve Bank of St. Louis, accessed January 31, 2018:

https://research.stlouisfed.org/fred2/series/ECIALLCIV/

The second chart depicts the ECI on a “Percent Change from Year Ago” basis, with a value of 2.656%:

ECIALLCIV Percent Change From Year Ago

The third chart depicts the ECI on a “Percent Change” (from last quarter) basis, with a value of .6%:

ECIALLCIV Percent Change

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2830.35 as this post is written

The State of the Union Address – Notable Excerpts

I found President Trump’s State of the Union Address last night (January 30, 2018) to contain some noteworthy comments.  While I could comment extensively on many parts of the speech, for now I will indicate excerpts that I found most relevant with regard to the economic situation, and may comment upon them at a future point.  I am highlighting these excerpts for many reasons; it should be noted that I do not necessarily agree with any or all of them.

Here are the excerpts I found most relevant, in the order they occurred in the speech:

Since the election, we have created 2.4 million new jobs, including 200,000 new jobs in manufacturing alone.  After years of wage stagnation, we are finally seeing rising wages.

Unemployment claims have hit a 45-year low.  African-American unemployment stands at the lowest rate ever recorded, and Hispanic American unemployment has also reached the lowest levels in history.

Small business confidence is at an all-time high.  The stock market has smashed one record after another, gaining $8 trillion in value.  That is great news for Americans’ 401k, retirement, pension, and college savings accounts.

And just as I promised the American people from this podium 11 months ago, we enacted the biggest tax cuts and reforms in American history.

Our massive tax cuts provide tremendous relief for the middle class and small businesses.

also:

A typical family of four making $75,000 will see their tax bill reduced by $2,000 — slashing their tax bill in half.

also:

We slashed the business tax rate from 35 percent all the way down to 21 percent, so American companies can compete and win against anyone in the world.  These changes alone are estimated to increase average family income by more than $4,000.

 

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2822.43 as this post is written

Velocity Of Money – Charts Updated Through January 26, 2018

Here are three charts from the St. Louis Fed depicting the velocity of money in terms of the MZM, M1 and M2 money supply measures.

All charts reflect quarterly data through the 4th quarter of 2017, and were last updated as of January 26, 2018.  As one can see, two of the three measures are very near an all-time low for the periods depicted:

Velocity of MZM Money Stock, current value = 1.299:

MZM money velocity

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 26, 2018:

http://research.stlouisfed.org/fred2/series/MZMV

Velocity of M1 Money Stock, current value = 5.488:

M1 Money Velocity

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 26, 2018:

http://research.stlouisfed.org/fred2/series/M1V

Velocity of M2 Money Stock, current value = 1.431:

M2 Money Velocity

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis; accessed January 26, 2018:

http://research.stlouisfed.org/fred2/series/M2V

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2872.87 as this post is written

Real GDP Chart Since 1947 With Trendline – 4th Quarter 2017

For reference purposes, below is a chart from Doug Short’s “Q4 GDP Advance Estimate: Real GDP at 2.6%” post of January 26, 2018, depicting Real GDP, with a trendline, as depicted.  This chart reflects the Gross Domestic Product Q4 2017 Advance Estimate (pdf) of January 26, 2018:

U.S. Real GDP chart

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2858.27 as this post is written

Durable Goods New Orders – Long-Term Charts Through December 2017

Many people place emphasis on Durable Goods New Orders as a prominent economic indicator and/or leading economic indicator.

For reference, below are two charts depicting this measure.

First, from the St. Louis Fed site (FRED), a chart through December 2017, updated on January 26, 2018. This value is $249,448 ($ Millions):

(click on charts to enlarge images)

Durable Goods New Orders

Second, here is the chart depicting this measure on a “Percentage Change from a Year Ago” basis:

Durable Goods New Orders Percent Change From Year Ago

Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St. Louis: Manufacturers’ New Orders:  Durable Goods [DGORDER]; U.S. Department of Commerce: Census Bureau; accessed January 26, 2018;

http://research.stlouisfed.org/fred2/series/DGORDER

_________

I post various indicators and indices because I believe they should be carefully monitored.  However, as those familiar with this site are aware, I do not necessarily agree with what they depict or imply.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2851.08 as this post is written