Another classic mainstream media article that touches upon the truth, but refuses to connect the dots. It is supposed to show that Wal-Mart’s results are a reflection of the stress on the middle and lower class in this country that account for about 77 million of the 115 million households. But who do they reference as a mother under stress? They pick Melanie Burkhardt. Can these faux journalists multiply and divide. Melanie says that the 2% payroll tax hike has knocked $260 per month from her budget. This means she is from a household with annual income of $156,000. They interview her as a reflection of the average middle class and poor family???? How bad must she be managing her finances that she now doesn’t have enough money to go to the movies or Olive Garden even though she has monthly income of $13,000?
But, she hits upon the key fact in her comments. Obama didn’t stick it to the rich with tax increases. The rich called their tax lawyers and told them to figure out a way to not pay the tax. Every working American got hammered by the payroll tax increase. Most Americans live paycheck to paycheck, even those making $156,000 per year. Gas prices have soared by 14% in the last two months and are the highest in history for the month of February. Wal-Mart executives and customers reference inflation as a problem, even though the BLS says there is no inflation. The story doesn’t mention that Wal-Mart’s U.S. comparable sales were up 1% last quarter, but their customer traffic was NEGATIVE. This means their sales increase was solely due to INFLATION/PRICE INCREASES.
The lady’s reference to not splurging at Olive Garden is reflected in the 2nd article below that came out this morning. Darden, the company that runs Olive Garden, Red Lobster and Longhorn Steakhouse pre-announced terrible results for their current quarter. Sales are plunging, after having plunged last quarter. The middle and lower classes can’t afford to gorge themselves as much as in the past. The money is running out. Obamacare is going to crush restaurant chains, retailers, and consumers as more money is spent on healthcare by all parties. Companies will hire less workers, convert workers to part-time and fire workers. This will mean less spending at retailers and restaurants. It’s the downward spiral of life.
This is the interconnected collapse brought on by government policies and Federal Reserve bailing out of failures and feckless politicians.
Wal-Mart outlook gives glimpse of economy
By By ANNE D’INNOCENZIO and CHRISTOPHER S. RUGABER, AP Business Writers – 13 hours ago
NEW YORK (AP) — As the fortunes of many Americans go, so goes Wal-Mart, so goes the economy.
Even as the world’s largest retailer on Thursday reported an 8.6 percent rise in fourth quarter profit during the busy holiday shopping season, it offered a weaker forecast for the coming months. The problem? The poor and middle-class Americans Wal-Mart caters to — and who are big drivers of spending in the U.S. — are struggling with rising gas prices, delayed income tax refunds and higher payroll taxes.
Melanie M. Burkhardt, a mother of two teenagers who shops at Wal-Mart, is one of those people. Burkhardt, a Waycross, Ga., resident, said she’s been hit with a double whammy: the payroll tax hike, which has cut her household monthly income by $260, and higher gas prices.
“We had to do a flip on our budget,” said Burkhardt, a legal assistant who plans to cut back on her trips to Wal-Mart. “This is money we used for things like going to a movie or splurging at Olive Garden. Not anymore.”
It’s widely known that Americans in the lower income brackets continue to struggle even as higher earners benefit from improved housing and stock markets, but Wal-Mart’s results signal that matters may be getting worse for the nation’s poor and middle-class. Wal-Mart is the latest in a string of big-name companies from Burger King to Zale to say those Americans are being squeezed by new challenges. But since Wal-Mart accounts for nearly 10 percent of nonautomotive retail spending in the U.S., it is a bellwether for the economy.
“Wal-Mart moms are the barometer of the U.S. household,” said Brian Sozzi, chief equities analyst at NBG Productions who follows Wal-Mart. “Right now, they’re afraid of higher taxes and inflation.”
Indeed, while wealthier households have seen their stock portfolios grow, poor and middle-class Americans have struggled to regain their financial footing since the recession ended more than 3 ½ years ago.
Stocks have roughly doubled since June 2009. Dividends and capital gains from stocks, which disproportionately benefit higher-income Americans, are taxed at lower rates compared with ordinary income
And while incomes for most Americans have failed to keep pace with inflation since the recession, that’s been particularly true for middle and lower-income earners.
Median household income, adjusted for inflation, fell 1.5 percent to $50,054 in 2011 compared with 2010, the latest periods for which figures are available, according to the Census Bureau. That was down 8.1 percent from 2007, just before the recession began. (The median is the point halfway between the highest and lowest levels.)
But lower and middle-income households fared worse: The share of overall income earned by the bottom 80 percent of households shrank in 2011, while the income for the top 20 percent grew. And in 2012, inflation-adjusted hourly pay barely rose, inching up 0.3 percent.
Another hurdle for lower- and middle-income Americans has been the jump in gas prices since mid-January. The average price for a gallon of gas rose 47 cents in the past month to $3.78 on Thursday, according to AAA.
Tax changes also have hit the nation’s lowest earners especially hard. On Jan. 1, Social Security payroll taxes rose 2 percentage points after a temporary tax cut expired. That sliced about $1,000 from the take-home pay of a household earning $50,000. Since the Social Security tax is levied against income only up to $114,000, it disproportionately affects middle- and lower-income households.
An even larger challenge for many lower-income Americans has been the government’s delay in processing income taxes and paying refunds. That’s because income tax rates weren’t set until a last-minute deal between the White House and Congress on Jan. 1. So the IRS pushed back the start of tax-filing season to Jan. 30, two weeks later than usual.
As a result, by Feb. 14 the government had paid only $55 billion in refunds, down from $77 billion at the same time last year, according to an estimate by UBS. That drop of $22 billion is more than twice the impact of the higher payroll tax. Refunds have accelerated recently and will eventually be paid out, but the impact still can be felt by many taxpayers: About 78 percent of taxpayers receive refunds, and the figure rises to 82 percent for those reporting income below $50,000.
Wal-Mart, based in Bentonville, Ark., said while its business has been volatile since December, the month of February, in particular, has been “slower than planned” largely due to the tax refund delay. The company said that resulted in Wal-Mart customers cashing about $1.7 billion in income tax refunds year to date, compared with $3 billion for the same period a year ago.
Bill Simon, president of Wal-Mart’s U.S. namesake division, said shoppers used their refund money last year to buy TVs ahead of the Super Bowl. This year, the retailer said it isn’t sure how customers will use the additional money when they get it, but some analysts say the most likely scenario is that they’ll save it.
Wal-Mart said it’s also unclear how the payroll tax will affect customers’ spending habits, although Simon said shoppers are “talking about it.” JP Morgan estimates that the payroll tax increase will equate to $70 a month less in take home pay for Wal-Mart shoppers, assuming an average annual income of $42,500. As a result, Wal-Mart is offering smaller packaging and less expensive products.
Wal-Mart earned $5.6 billion, or $1.67 per share, during the fourth quarter that ended Jan. 31, up from $5.16 billion, or $1.50 per share, a year earlier. Results were helped by a lower tax rate, which was 27.7 percent, compared with the rate of 30.9 percent a year ago. Net sales rose 3.9 percent to $127.1 billion.
Earnings topped Wall Street estimates of $1.57 per share, but sales fell short of the $127.8 billion analysts were expecting.
During the current quarter, Wal-Mart says it expects earnings to range from $1.11 to $1.16 per share, below the $1.18 per share analysts polled by FactSet are expecting. For its namesake U.S. business, Wal-Mart expects first-quarter revenue at stores open at least a year, a measure of a retailer’s health, to be unchanged from a year ago. The pace of revenue growth has slowed in recent quarters, and some analysts believe Wal-Mart’s forecast could be too optimistic.
For the year, Wal-Mart expects earnings of between $5.20 and $5.40 per share, while analysts expect $5.38 per share.
Despite the subdued forecast, investors were bracing for a weaker report after Bloomberg published a story Friday that leaked an email from an executive characterizing the first two weeks of February as “a total disaster.” Shares fell that day, but investors appeared to be relieved on Thursday that Wal-Mart’s outlook wasn’t worse. Shares rose about 1 percent, or $1.05 per share, on Thursday to close at $70.26.
D’Innocenzio reported from New York. Rugaber reported from Washington, D.C.
Olive Garden owner Darden warns on 3rd quarter
Olive Garden owner Darden expects sales slump in 3Q, cuts 2013 profit forecast
ORLANDO, Fla. (AP) — Darden Restaurants, struggling to draw more customers into its Olive Garden and Red Lobster restaurants, predicted a third-quarter profit Friday that was below Wall Street’s expectations and cut its outlook for the year.
The Orlando, Fla.-based chain has tried to revamp menus and marketing for its flagship chains. But revenue at Olive Garden, Red Lobster and LongHorn Steakhouse locations open at least one year is expected to fall 4.5 percent in the quarter ending Feb. 24, indicating those efforts have yet to pay off.
“We recognize there is still more to do to further address affordability and to improve other important aspects of the guest experiences we provide,” said CEO Clarence Otis in a statement, adding that re-establishing growth at the three chains was Darden’s top priority.
Otis said the first half of the fiscal third quarter was “encouraging,” but higher payroll taxes and rising gas prices, along with severe winter weather, sent sales sliding in February.
Darden isn’t the only company saying the higher payroll tax has cut into its business. On Thursday Wal-Mart Stores Inc. said higher taxes, along with rising gas prices and delayed income tax refunds, were also crimping spending by its customers.
On Jan. 1, Social Security payroll taxes rose 2 percentage points after a temporary tax cut expired. That sliced about $1,000 from the annual take-home pay of a household earning $50,000.
But Darden has longer-running problems. Like other casual sit-down restaurant companies, it’s been dealing with tougher competition due to the growing popularity of chains such as Chipotle Mexican Grill and Panera Bread. They offer food that’s a step up from fast food but not as expensive as a sit-down restaurant.
To combat this, at Olive Garden, the company rolled out an updated advertising campaign and introduced more light and affordable dishes. At Red Lobster, it added options for people who don’t like seafood.
But so far these changes have not sparked a turnaround. In January Darden replaced the president of Olive Garden in an effort to improve results.
Darden Restaurants Inc. said net income from continuing operations in December-February period will be $1 to $1.02 per share, below analyst expectations of $1.12 per share, according to FactSet.
That’s based on revenue in restaurants open at least one year, a key retail metric, dropping 4 percent at Olive Garden, 7 percent at Red Lobster and 1.5 percent at LongHorn Steakhouse. For its division of smaller restaurant chains, it expects the measure to rise 2 percent.
For the fiscal year ending in May, Darden predicted revenue in restaurants open at least one year to rise 6 to 7 percent across its chains, with a drop of 1.5 to 2.5 percent for the division containing the Red Lobster, Olive Garden and LongHorn Steakhouse chains.
The company cut its outlook for 2013 earnings from continuing operations to $3.06 to $3.22 per share, from a December prediction of $3.29 to $3.49 per share. Analysts expected $3.38 per share.
The forecast includes costs of 9 cents per share related to acquiring the Yard House restaurant chain.
Darden plans to announce third-quarter results March 22.
Shares rose despite the weak outlook, however, after an upgrade from a Janney analyst. He said the company’s problems are already reflected in the stock’s value. Shares had dropped 12 percent over the past 52 weeks.
The stock added $1, or 2.2 percent, to $45.74 in late morning trading. That’s still close to the low end of its 52-week trading range of $44.11 to $57.93.
“We believe a lot of the bad news about Darden is already in the stock,” Janney’s Mark Kalinowski said, particularly with Friday’s outlook. “Today’s news looks to us like a classic ‘buy on bad news’ opportunity.”
He upgraded the stock to “Buy” from “Hold.”