WAL-MART CEO BILL SIMON EXPECTS INFLATION
WAL-MART CEO BILL SIMON EXPECTS INFLATIONBy Jayne O'Donnell - USA Today - March 30, 2011
U.S. consumers face "serious" inflation in the months ahead for clothing,
food and other products, the head of Wal-Mart's U.S. operations warned
Wednesday.
The world's largest retailer is working with suppliers to minimize the
effect of cost increases and believes its low-cost business model will
position it better than its competitors.
Still, inflation is
"going to be serious," Wal-Mart U.S. CEO Bill Simon said
during a meeting with USA TODAY's editorial board. "We're seeing cost
increases starting to come through at a pretty rapid rate."
Along with steep increases in raw material costs, John Long, a retail
strategist at Kurt Salmon, says labor costs in China and fuel costs for
transportation are weighing heavily on retailers. He predicts prices will
start increasing at all retailers in June.
"Every single retailer has and is paying more for the items they sell, and
retailers will be passing some of these costs along," Long says. "Except for
fuel costs, U.S. consumers haven't seen much in the way of inflation for
almost a decade, so a broad-based increase in prices will be unprecedented
in recent memory."
Consumer prices -- or the consumer price index -- rose 0.5% in February, the
most since mid-2009, largely because of surging food and gasoline prices.
Core inflation, which excludes volatile food and energy costs, rose a more
modest 0.2%, though that still exceeded estimates.
The scenario hits Wal-Mart as it is trying to return to the low
across-the-board prices it became famous for. Some prices rose as the
company paid for costly store renovations.
"We're in a position to use scale to hold prices lower longer ... even in an
inflationary environment," Simon says. "We will have the lowest prices in
the market."
Major retailers such as Wal-Mart are the best positioned to mitigate some
cost increases, Long says. Wal-Mart, for example, could have "access to any
factory in any country around the globe" to mitigate the effect of inflation
in the U.S., Long says.
Still, "it's certainly going to have an impact," Long says. "No retailer is
going to be able to wish this new cost reality away. They're not going to be
able to insulate the consumer 100%."
http://www.usatoday.com/money/industries/retail/2011-03-30-wal-mart-ceo-expects-inflation_N.htmAnd that's not telling??!!