SAD FACE: Walmart’s Q1 Earnings

This morning, Walmart announced disappointing results for the 1st quarter of the fiscal year, making it three quarters in a row where the company’s reported results fell below Wall Street expectations.

Expectations were already low coming into today’s announcement, given leaked company emails where an executive (who, by the way, made a sudden exit after his commentary went public) lamented that February sales were a “total disaster.” Company executives quickly tried to calm fears by dismissing those emails and suggesting sales later in the quarter had returned to normal. But sales in stores open more than a year, a key indicator of retail health, fell by 1.4 percent, the worst performance in over two years.

These worrisome results provide back-up for what Walmart associates themselves have told investors for a year and a half, and what outlets like Bloomberg and The New York Times are now reporting: Walmart is hitting the limits of its cut-costs-to-the-bone business model, and it’s affecting sales.

Guess that’s what happens when you understaff stores to save a few dollars here and there. As one Wall Street analyst told Bloomberg, you get “a thinly spread labor force struggling to keep up with all the work that needs to be done.” That means long lines at cash registers, frustrated customers who leave the store because they can’t find available associates to help them, and shelves that are empty (often while inventory languishes in the back room) because there aren’t enough people to restock them. Not really a recipe for retail success.

What do you think?