Outgoing Wal-Mart CEO's Words

Earlier this week, Wal-Mart's (WMT) outgoing CEO Lee Scott spoke at the National Retail Federation's Annual Convention. His speech can be seen here. This was the last time Scott will speak in public as the leader of the company.

After his prepared remarks, Scott sat down for a Question & Answer session with NRF President and CEO Tracy Mullin. Mr. Scott was asked about various topics ranging from government spending, retail trends, and the economy. What Scott had to say about the economy and consumer spending is worth reading.

On the economy:

    
• Hopes that by next Christmas it isn't any worse    
• If things get better, they will only be modestly better    
• Doesn't see anything that points to things turning around quickly    
• Stimulus should have some impact

It appears that Scott agrees with us that this recession will last longer than most expect, and a rebound is not likely to occur in the second half of 2009.

On spending habits:

    
• Scott believes that there is a fundamental change in consumer buying habits    
• Young people have given up something like eating out, going to the movies, or shopping, and they felt good about it    
• The consumer won't go back to a lifestyle of consumption and debt    
• Many young people learned what it is like to live on the edge when the bad times come    
• Their appetite is now towards more about living things differently    
• This change in consumer attitudes is not all that bad

This is a topic that I've writing about for some time. Consumer attitudes toward spending and debt began to change in 2008, and those shifts in attitude are gaining traction with more people. Consumers are becoming more frugal and increasing savings.

Many consumers are still reeling from staggering declines in wealth due to losses in home values and the stock market. Anyone looking for a return to the days of consumers spending beyond their means or taking on more debt to keep up with the Joneses will be sorely disappointed.As a result, we would continue to limit exposure to the retail sector and avoid department stores such as JC Penney (JCP) and Nordstrom (JWN); specialty retailers such as Cost Plus (CPWM) and Hibbett Sports (HIBB); and e-tailers Overstock.com (OSTK) and Priceline.com (PCLN).

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