Thursday, March 31, 2011

Retailers (WMT) (JCP) (M) (HD) (TGT) (LOW) (ODP) All Down on Inflation Expectations

The CEO of Wal-Mart (NYSE:WMT), Bill Simon, said in an interview with USA Today that he sees inflation having an impact on price in the latter part of 2011, causing retailers like JC Penney (NYSE:JCP), Home Depot (NYSE:HD), Target (NYSE:TGT), Lowe's (NYSE:LOW), Macy's (NYSE:M) and Office Depot (NYSE:ODP) to all fall.

Food companies have already had to begin to endure the higher prices, as input costs rise as food demand surges around the world. In that case the companies have responded more by lowering the amount of product in some packaging, rather than raising prices or suffering the loss of margins and earnings.

Of course general retailers, for the most part, don't have that luxury, and so will be force to raise prices or allow earnings to underperform, something most will most likely not be willing to allow to happen.

Bottom line is it appears in an environment of higher fuel costs retailers will have to boost prices, making it a difficult time for the overall sector going forward, in an a price sensitive situation.

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