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A Peak Underneath
By Bill Tatro
When Walmart and Target both recently announced improvements to their
top-line (revenues), the mainstream media was quick to point out how
the consumer was back. After all, weren’t we seeing the same
thing across all consumer sectors?
In addition, as usual, the same companies were beating the analyst’s
expectations for bottom-line (net income.) Never mind that
expectations are usually dumbed down, so to beat the number is almost
always guaranteed.
With top-line and bottom-line both improving, what more could we ask
for?
Unfortunately, what the mainstream media never does is to go inside the
headline numbers, and get the real story. Wal-Mart, for example,
has become the official grocery store and gas station to America.
By Walmart’s own statements, their top-line has increased because of
the increase consumption of food and gas by their customers.
Mainstream media would have you believe the consumer is buying more
food and more gas. The truth is the consumer is buying the same
amount of food and gas, but just paying more. For instance,
twenty gallons of gas x $3.00 = $60.00, and twenty gallons x $4.00 =
$80.00.
Yes, the sales did increase, but the quantity remains the same. I
guess Walmart should be hoping for $10 gas. So Walmart’s top-line
rises not at the benefit of the consumer, but at the consumer’s
expense.
The bottom-line reports are just as misleading. The CEO of
Hewlett-Packard, in a memo to executives, said they had to “watch every
penny,” and that the current head count was “not sustainable” in an
environment they were experiencing.
This would seem to be corporate speak for more layoffs.
But how? Hasn’t corporate America cut the fat, cut the muscle,
and now we’re learning their about to cut the bone?
But improve the bottom-line they must, even at the expense of
employees, who ultimately are also consumers. McDonald’s, lauded for
hiring 62,000 people at minimum wage after receiving one-million job
applications, is experimenting with kiosks in Europe.
Kiosks are efficient, but also require about one-third less
employees. It would appear McDonald’s has learned how to cut the
bone, and improve the bottom line.
John Maynard Keynes once said the employment demise of a country would
be through the development of technology. It would seem McDonalds
is beginning to prove this point.
Top-line and bottom-line headlines suggest the consumer is back.
However, looking beneath the covers, it’s a whole different story and
one that doesn’t bode well.
Read it at Townhall Finance
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