Walmart Issues NEW Warning To U.S. Economy - Sales Are Falling

Over the past few years, as our economy has continued to weaken, one company has sort of stood out and has passed the test of time and has still been doing well up until now. And that company is Walmart. Walmart just reported its weakest U.S. sales growth in more than six years. What happened six years ago, guys? That was the start of the pandemic. And for a while, Walmart was doing extremely well because Walmart has some of the lowest prices you can possibly find. And unlike some other stores, like Target, for example, didn't get involved in things they shouldn't have gotten involved in and never saw a big portion of their customers leave them behind. And the reason why Walmart is in the position to flash a warning sign for the economy more than most other retailers or businesses in the United States is because Walmart serves more than 150 million Americans every single week. And they sell essentials. In fact, Walmart has become one of the biggest grocery stores in America. But of course, it's not just groceries. You can buy pretty much anything else you can think of at Walmart as well. So Walmart's U.S. comparable sales increased only 2.6 percent during the quarter that ended July 31st. And that was the company's smallest quarterly increase since 2020 and fell far below the 3.8 percent gain that analysts expected. And because of this, this sent Walmart's share prices down 9.2 percent in just one day, which was also Walmart's largest single day percentage decline going back to May of 2022. And this shows us how concerned investors in Walmart stock are about weakening consumer demand throughout the economy right now, because Walmart has been that one strong retailer that's been hanging on. Not that they're the only one, but they've been the strongest one throughout this economic downturn. And there was so much positive news surrounding Walmart over the past few years, even things like high income earners starting to shop more at places like Walmart and the dollar stores and things like that. And Walmart typically does well during an economic downturn because consumers trade down from the more expensive stores. If you can get the same thing at Walmart for cheaper, why not do it in a time when your wallet's being squeezed by inflation? One of the most troubling parts of this report is that Walmart's physical store comparable sales declined in the low single digits. And this has also been happening during the previous two quarters as well. However, the e-commerce department, which is the online sales, rose 24 percent. So this shows us that less and less people are going into Walmart and more people are shopping at Walmart online, but it is slowing down. So what these results show is that people just haven't stopped spending money altogether, but they are changing how they're shopping. People are becoming more selective about what they buy, where they buy it, and how much they're willing to pay. In fact, a couple of weeks ago, I did a story similar to this about Procter and Gamble. They've reported their sales going down quite a bit over the past year because they sell name brand products like different soaps and toothpastes and different sorts of household items that people need. And instead of buying those name brand Procter and Gamble products, they're buying them from the store brand or somewhere else they can get it cheaper. At the same time, more and more people buying groceries from Walmart while reducing their discretionary purchases. And this is kind of the general trend we're seeing among all households in America. And this hurts Walmart because groceries is a very low margin business. The best thing with Walmart selling groceries is they figure, well, we'll get you in here to buy our cheap groceries, but then you have the whole rest of the store to walk around and maybe pick up a few other items that we can make a higher profit margin on. But this is the thing that's changing. People are going in for the cheap groceries and that's it. And today I am walking along the Spanish Trail here in Tiburon, California. And these high gas prices are really crushing American wallets right now, guys. It's estimated that Americans have spent an additional $88 billion on gas and diesel in 2026 due to the war in Iran. That means it's $88 billion that people don't have to spend at Walmart, restaurants, or anywhere else. And right after Walmart's report came out, oil continued to inch up even higher, getting closer and closer to that $100 a barrel again, which means that people are going to have to be dedicating even more of their budgets to gas prices soon. And these retail sales in general are a very deceiving number for the overall economy, because what we've continued to see up until recently is the retail sales continue to go up, but lately they have turned negative. And of course they're going to go up when inflation is going up at about 4% per year officially. Who knows what the real number is unofficially, probably at least double that. So of course you're going to see an increase in spending because people have to spend more just to be able to buy the same amount of things, or maybe even fewer things than they bought a year ago. And if it wasn't for all of the higher earners starting to shop at Walmart, Walmart would be seeing even more trouble right now because a lot of those high income shoppers that have switched over to shopping at Walmart are still doing so and are not being as affected by this poor economy. And if it wasn't for that part of their customer base, Walmart would probably be reporting negative numbers right now, instead of just less than expected positive ones. And here's the other thing, because Walmart is essentially the nation's number one grocery store right now, this is another thing that sort of artificially props up Walmart's numbers and makes it look better than it really is, because a lot of people are going in there for groceries, but not a whole lot else. Interestingly enough, they say that groceries, toys, and fashion products and Walmart's private brands performed relatively well during this last quarter. And notice how the other things are completely unessential, right? Toys are non-essential, fashion products are non-essential, but yet that stuff is still doing well at Walmart, which is kind of funny. And also think about this guys, going back to my point about inflation, Walmart's comparable sales went up 2.6%, but the most recent CPI reading was at 3.4%. So just like home price growth, if you adjust this number for inflation, Walmart is actually seeing a net decline in comparable sales. People don't look at it this way, and it's something that never shows up in these earnings reports or economic reports. If it's a positive number nominally, it's celebrated, but even investors now aren't being so fooled by this. And it turns out there's yet another reason that Walmart's numbers came out positive, at least nominally, and that is in part because of the massive tariff refunds that they received, $2.9 billion in tariff refunds. And a lot of that money was used to reduce prices during the quarter and help prop up sales even more. So even big corporations like Walmart are now having to do some of the same sort of shenanigans that our government does to try to finagle the numbers and make it look good. Because after all, they have a massive incentive to do so because they don't want their share prices falling. They don't want investors getting spooked and pulling out, but they can't hide it forever. And that is shown in the profits, because even though their total revenue increased, their profits decreased. Walmart's total net sales increased 5.9%. However, net income, which is their actual profit, declined 9.4%. So when you really dig into these numbers, Walmart is not doing as good as people think, guys. I mean, I'm surprised by this too, because I thought that Walmart was one of like the last businesses in America, especially being a retailer, that's still doing pretty well. But that's just no longer the case. And even though things are not looking great for Walmart, they're still actually raising their net sales expectations moving forward. Their previous forecast was 3.5% to 4.5%. Now they're saying it's 4% to 5% increases that they're expecting in the next quarter. They're also expecting their operating income to go up as well. And that's really the warning, guys. I think when you see retailers like Walmart starting to go on shaky ground, I mean, if Walmart's not doing good, that means basically no one's doing good, because it doesn't really get any cheaper than Walmart. It doesn't really get much more accessible than Walmart. The only real competitor to Walmart is Amazon, which they recently did surpass Walmart as being the world's largest retailer, but Amazon doesn't have any stores. And this week has really just been a whirlwind of crazy economic stories, guys. We saw the government have a direct intervention with the treasury market to try and push interest rates down on the treasuries, because the national debt just exploded past 40 billion and treasury investors are worried, therefore demanding a higher yield on those investments. But instead the federal government came and said, wait a minute, we'll start buying double the amount of treasury starting in a couple of weeks from now and going towards the end of the year for a couple months. And this is supposed to be like a temporary measure and it helped reduce interest rates initially, but this week still ended higher, guys. The 10-year treasury ended at 4.737 this week, and the previous week is at 4.695%. And the 30-year treasury is already above 5.3%, which is the highest that it's been since 2007, since the last big economic crash. So basically anybody who buys treasuries right now is extremely concerned about the national debt and the government's ability to control spending and borrowing, which clearly they've demonstrated they have no control over that whatsoever. They refuse to do the right thing, guys. In fact, the one thing that both political parties have in common is that they love to spend money and they both run up the deficits like there's no tomorrow. And as a result of these treasury yields rising, we also saw this week the dollar fall in value. The dollar index fell 0.7% for the week and Bitcoin went up 22% for the week and gold climbed back above $4,600 an ounce. And what this is called is a debasement trade. And this means that investors are purchasing assets they believe will hold their value if the dollar weakens and also suggests that investors are viewing the treasury bond buying announcement as a sign of deeper concern about government borrowing costs, because this is all just a temporary solution to a very long-term problem that has not been resolved. The stock market for the week finished with some losses. The S&P 500 was down 1.4%, the Dow fell 0.8%, and the NASDAQ dropped 2.1%. And here's the other thing, guys. All these AI companies, which the stock market bubble is built on right now, they require borrowing a tremendous amount of money to move these AI investments forward. And you know what happens when treasury yields go up? Borrowing becomes more expensive. And so investors become less willing to pay extremely high stock valuations when the yields on the U.S. treasuries are going up, because this is a guarantee that borrowing costs for these AI companies is going to go up. And these companies already don't make money. They're losing billions of dollars a year, and now they're going to have to pay millions extra in just interest just to be able to moving their operations forward. The short story is here, the government cannot control the treasury market forever, guys. They can temporary influence the yields through these buybacks, but ultimately, it's up to the investors to decide the interest rate, because they're going to need more money. Just basically think of it like this. The government's trying to pay off a credit card with a credit card. How long can you do that for? And then at the end, what do you end up with? More debt than you started with. And this is also a guarantee that the national debt is going to climb even higher, even faster. So basically what they keep doing is doubling down on an already very bad financial situation. It's just like if you as a person are in $30,000 in credit card debt, and somehow you managed to get your hands on another credit card where you can charge up another $10,000, and rather than paying it all off, you just continue to rack up more and more debt, and a larger portion of your monthly income is going towards those minimum credit card payments. That's essentially what the federal government is doing right now. And this ends up making all of our lives more expensive, because not only are future generations on the hook for this national debt that's exploding, but in the near term, meaning right now, as these treasury yields continue to go up, it makes everything else that needs to be financed more expensive. That's why you are about to see mortgage rates cross back over 7% very soon because of this. Car loans, those become more expensive. Credit card payments, which can fluctuate, those are variable interest rates most of the time, that can go up. So if you are somebody carrying a credit card balance regularly, pay attention to your statements, guys. The interest that you're being charged is likely going to be going up very, very soon. In fact, it's estimated that over the past decade, due to the big increase in federal debt that we have, the national debt going over $40 trillion, it has cost people roughly an extra $2,500 a year just on the mortgage of a typical home, not even mentioning the higher purchase price. So you're paying a higher interest rate, higher purchase price, which amplifies this effect. And that's only one thing. That's only mortgages we're talking about here. We're not talking about any other higher interest payment that people have had to pay due to this. Over a 30-year loan, that's $76,000, guys. Basically made it so they either have to cut down social security payments dramatically or hike taxes significantly, neither of which are very popular. And that's why you're seeing the government in cahoots with the Fed continue to choose higher inflation, guys, because this is how they can get away with doing neither. They don't have to cut social security. They don't have to raise your taxes. We'll just keep inflation running hotter than expected and make it look like we're trying to do something because that is the hidden tax. Because the higher inflation is, then the more it erodes all of that debt. But at the same time, it makes your life exponentially more expensive as the wages people are getting paid do not keep up with inflation. And simultaneously, people have to pay more to borrow any amount of money. And according to an economist named Tomas Malanin, who specializes in financial crises, he says that right now, the U.S. is barreling towards a recession. And before you stop watching and say, I've heard that one before, you've been talking about that over the last few years, Michael, let me just tell you that I believe personally that we have been in a recession or possibly even the beginning of a depression going back to 2022 when inflation exploded. But it's all been hidden by these positive economic numbers that have been juiced by inflation. That's what I think. So I think we've been in this recession for a long time already. But he's saying that the U.S. is very close to another downturn despite the booming stock market and the surface level growth. And of course, he doesn't have a concrete date of when the recession might start, but he says it basically could happen at any minute. And the way that he came up with this is by analyzing three different economic variables. One is corporate bankruptcies are climbing very rapidly right now. If you look this chart right here, you can see that ever since 2022, like I said, when the economy started seeing extremely high inflation, that's when the bankruptcies started to rise. And every year after that, they have been going nowhere but up. And it's almost to the level now of the first year of the pandemic. Over the past 12 months, the U.S. recorded more than 600,000 new bankruptcy filings, which is up 12% from the previous year. And then he also mentions the bond yields like we were just talking about as another huge warning sign that we are headed towards this recession. He says something else we got to pay attention to is the private sector yield curve. The private sector yield curve is close to un-inverting, which means that corporate yields are close to surpassing the bank prime rate. And that can happen if investors demand a higher yield due to perceived risks of holding corporate debt. So basically the same situation as what's happening with the treasury yields, but with corporate bonds. So corporations will issue debt that investors can buy at certain interest rates. But as interest rates expectations continue to rise, debt that's being issued at lower rates is less appealing to an investor because you're going to want to get the highest return on your investment as possible. Every big major crisis we've had over the past 30 years or so has all involved the private sector yield curve turning positive. It happened right before COVID, it happened during the great financial crisis in 2008, and it happened in the big recession that we had in the early 2000s. And the other warning sign is the K-shaped economy that one of my viewers actually pointed out recently that they might as well start calling it the L-shaped economy. That was such a great point because it just shows how exponentially rich the rich are getting and how much everybody else is losing right now. And because we only have a small portion of the U.S. economy holding up the entire show right now, holding up all of these positive numbers, that is a big warning sign for where things are going. If those people suddenly stop spending or something breaks on the high end, that's it. The show is over. But we shall see, right? Nobody has a crystal ball. I'm not sitting here making some crazy prediction or anything like that. But I think it's important to pay attention to all of this stuff because it affects your daily life, guys. Even if you don't consider yourself to be any sort of investor, if you have a retirement account, if you borrow any money for anything, all of this stuff has a big impact on your life, indirectly. But the more you know about this and the more you can kind of take precautions and be prepared for what is coming, which is basically guaranteed higher inflation, higher gold prices, maybe higher Bitcoin prices from what we've seen this week, which all translates to a higher cost of living. The question is, what are you going to do about it? Are you going to buy those assets? Are you going to try to find ways to increase your income? Are you going to be trying to find ways to reduce your cost of living? It's all up to you. So let me know what you guys think about this down in the comments below. And if you enjoyed this video, make sure you're subscribed to the channel. And if you don't want to wait for my next video to come out, check out this one on the screen right over here, and I'll see you in the next one.