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Quick Hits: Wal-Mart Will Take a Check

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Brief scrutiny of today's headlines

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How does Wal-Mart (WMT) continue to float a profit while most retailers are drowning in the red?

Because of clever initiatives like cheap meal solutions and the continuation of their low-cost prescription drug program. According to Bloomberg, Wal-Mart has expanded its prescription drug deals, offering pharmaceuticals for $4 a month or three months for $10, forcing Target (TGT) to create similar discounts. It's also offering to cash economic stimulus checks in-store free of charge.

The National Retail Federation says consumers plan to spend 40% of their stimulus checks, but are now more likely to spend them on food and gas than when the program was first announced in February. Still, by offering to cash those checks, Wal-Mart ensures a captive audience. Who can resist low prices with free cash in hand?

Standard & Poor's Retail Index dropped an average of 21% last year, while Wal-Mart posted a 22% increase. According to the Fox Business Channel, Wal-Mart reported Tuesday that their profits rose 6.9% in the first quarter. Earnings were at $3.02 billion, or 76 cents per share, in the three months leading up to April 30th. With numbers like these, maybe Wal-Mart should be the one sending out stimulus checks.

The company is expanding outside the U.S. to compensate for domestic slowdown and to maintain its competitive edge, building new stores from Brazil to China. According to Market Watch, Wal-Mart's control of inventory helps alleviate the need for unnecessary sales and promotions and saves it money. This keeps retail prices down so cost-conscious consumers can feed their families, while also feeding the Bentonville giant.
No positions in stocks mentioned.

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