3 Troubling Signs Point to 1 Big Opportunity: Wal-Mart Stores, Inc. (WMT), Darden Restaurants, Inc. (DRI)

Page 1 of 2

Wal-Mart Stores, Inc. (WMT)Turn on the news these days, and you get an absolute smorgasbord of dread. We consumers are taking home less of our paychecks, putting pricier gas in our cars, and aren’t spending as much money. Is this the start of the Great Recession 2.0?

Let’s first look at the triple whammy of worry brewing for consumers these days. Then we’ll uncover the big opportunity this presents for investors and why.

Trifecta of terror
There exist three troubling signs regarding consumer spending these days:

1. Deteriorating consumer sentiment. A recent Reuters/University of Michigan survey revealed an unexpected deterioration in consumer sentiment, with the index at its lowest since December 2011.

2. Revised spending plans. A National Retail Federation survey recently found that seven out of 10 Americans were adjusting their spending plans to cope with this year’s payroll tax changes.

3. Increased coupon clipping. CEO Steven Boal of Coupons.com recently told CNBC that consumers are clipping coupons at a frantic pace not seen since before the Great Recession. The website tracks how often people view and print coupons, and its “Internet Coupon Index” indicated an sharp increase in demand for coupon offers.

These events — in addition to higher gas prices and the delay in tax refunds — are leading to a cornucopia of consumer despair, which may slow growth for companies that rely heavily on our spending. In fact, the National Retail Federation poll uncovered that one-third of consumers will reduce how much they dine out, and one in four Americans plans to spend less on small treats, like visits to coffee shops.

Changing tides
According to Coupons.com, the most popular types of coupons comparison shoppers are redeeming right now are for food items, specifically cheese and pasta. Last year, Kraft Foods Group Inc (NASDAQ:KRFT) — maker of Velveeta cheese, Oscar Mayer cold cuts, and Kraft macaroni and cheese — refused to budge on pricing in response to aggressive price cuts by competitors. That hard line led to a loss of market share for Kraft, a decline in fourth-quarter revenues, lowered sales forecasts, and revamped marketing strategies. I’m betting Kraft won’t make that same mistake this time around.

In addition to comparison-shopping, people also seek comfort when they’re cutting back financially. And buying small items — like personal-care and beauty items — make them feel better. In fact, the website data acknowledged that coupons for The Procter & Gamble Company (NYSE:PG)‘s Pantene and Vidal Sassoon are trending. Consumers might cut back on expensive hair treatments at spendy salons, but they’re still interested in treating themselves to a little luxury.

Cutbacks to dining out are already hitting several restaurant chains. For example, Darden Restaurants, Inc. (NYSE:DRI) recently reported lower traffic in their Olive Garden, Red Lobster, and LongHorn Steakhouse restaurants. Even though Darden Restaurants, Inc. (NYSE:DRI) expects total sales growth for the year to fall between 6% and 7%, fiscal third-quarter traffic at all three dining venues are expected to be 4.5% lower than the same period last year.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

The 10 Biggest Outlet Malls in USA

The 5 Most Popular Rap Songs of All Time

The 10 Countries that Eat the Most Meat

The10 Most Expensive Countries to Fly To

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!