Chart of the Day (3): Is Walmart Signaling Retail Slump?

Walmart IS Retail.  What is Their CHART saying?

Walmart (WMT) is the nation’s largest and dominant retailer in terms of annual revenues with about $500 Billion.

Costco (COST), number 2, has roughly 30% of WMT’s sales.  (https://www.investopedia.com/articles/markets/122415/worlds-top-10-retailers-wmt-cost.asp)

Walmart’s chart screams TROUBLE even more than one of the famous “Black Friday Brawls”.

Walmart has traced out a textbook “Head and Shoulders” Top Reversal and is dangling just above the “Neckline”.  Breaking below $92 would turn the Pattern BEARISH and, in addition, be a very negative omen for the economy.  It would be highly suggestive of worsening recessionary conditions.

Walmart Has Ceased To Be A Growth Story

Walmart’s revenues have grown by a mere 3% in the last 3 fiscal years while operating income has actually shrunk.   In the fiscal year ended January 31, 2015, Operating income was $27.1 Billion but only $22.2 Billion in the last year (2018).  (https://finance.yahoo.com/quote/WMT/financials?p=WMT).

By comparison, COSTCO’s revenues grew 22% over the same period and Operating income by 24%.

The Retail Sector Is Plagued by Bankruptcies

The Retail Sector is consolidating in a hurry.  Dozens of retailers have gone bankrupt and/or liquidated in 2018 alone, including giants Sears and Toys R Us.  (https://www.cbinsights.com/research/retail-apocalypse-timeline-infographic/).

Nonetheless, expectations for a robust holiday season remain high.

Package Shippers Are Crashing

The Slides below of Federal Express and UPS are alarming.  UPS, the world’s largest shipper,  recently forecast moving 750 million packages during this holiday season, triggering high volume surcharges.  (https://www.cnbc.com/2017/10/26/ups-expects-to-ship-750-million-packages-this-holiday-season.html).  UPS is also Amazon’s key shipper.

Federal Express is about half the size of UPS in revenues.  It’s stock price, too, has gone into free fall.  Are these two shippers corroborating the chart of Walmart?  Is Christmas a bust?

Retail Sales Reported Due Friday, December 14th

Tomorrow will be the final major economic report prior to the Federal Reserve meeting of next week.  Should those numbers disappoint, this may prove the straw that pushes WMT through its Support (Neckline).

Keep in mind that the Fed meeting is Tuesday and Wednesday of next week.  Investors and Traders often go into “wait and see” mode ahead of these meetings.  Thus, we may not have a significant move until then.

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