It only seems like yesterday that we were talking about Walmart and its biggest share price drop in over 30 years (I had to check, it was back in May).  But here we are talking about them again!

Why this time?  Well Walmart is a bellwether of the US Economy.  It shows us who is buying what and therefore we can see changes in consumer spending patterns which gives us a view of how people are reacting to the economic changes.

With the rise in energy, food, housing and gas prices we know it's not possible to buy the same things you did for the same amount of money; that's inflation!  So how are all of our spending habits changing?

Well the Walmart results tell us a number of things:

• More mid-to-higher income customers have come to Walmart looking for value.  Higher income consumers are feeling price pressure
• Increased sales of generic products and lower cost food items.  Sales of private-label products are growing twice as fast as in the first quarter.
• There has been a higher use of credit cards.  More people need to spread the cost of their purchases

These are all classic signs of a recession and lower living standards as consumers cut back and trade down.  In fact their CEO Doug McMillon told analysts on a conference call on Tuesday "We expect inflation to continue to influence the choices that families make and we’re adjusting to that reality so we can help them more”.  They also said that they have "cancelled billions of dollars in orders to help align inventory levels with expected demand".  No doubt some of this is due to supply chain issues from China meaning that seasonal stock is no longer relevant but it is also likely to mean they are revising what is required based on consumer spending.

Other economic data shows us that the amount of consumer credit is being increased significantly and that also most of the savings built up via stimulus checks has now gone.

Walmart shares are now down about 8% so far this year, so slightly above where they were after the profit warning back in May but the company's own outlook for the future is still cautious.

Does this make Walmart shares a buy?

Undoubtedly the environment for the consumer is going to get tougher so that will further impact on earnings.  However, Walmart sells stuff that we just can't do without like food, clothing and fuel.  What's more it sells these things at attractive low prices which is why it is increasing its customer base.  And unlike a subscription to Netflix you can't live without food.  Walmart is historically a well managed business so from a long term point of view you would expect it to be a good 'buy' option.  The question is, in a recessionary environment will the shares give up more value and should you wait before you purchase?  Which is the $64,000 question, because it's almost impossible to time the markets. 

If you intend to hold the shares for the long term (5-10 years) then you have the option of purchasing now or waiting to see how Walmart fare in the all important holiday season of Q4 covering Thanksgiving, Halloween and Christmas.  You pays your money, you takes your choice as they say.

Remember as an investor you need to think long term.

All comments are personal opinions only and not intended as investment or trading advice.  Inteligex accepts no liability or responsibility whatsoever for any loss or damage resulting from the use of Inteligex products, services or opinions incurred while trading or investing.  We are not registered Financial Advisors, you should always take Professional Financial Advice before making investments.