The outlook can be characterized by such factors: Retailers are generally affected by the state of the economy and by consumer's spending and income: WalMart is more exposed to foreign markets, whereas Costco is mainly a U.S. company. The U.S. stock market is overvalued, we may expect lateral movements until the economy will go back to its non-QE state; thus, even if not directly affecting sales, market's swing may affect management decisions and reporting. Additionally, labor regulations and trade agreements may affect revenues by increasing costs and reducing gross margins: WalMart issues with workers seems to be addressed; nonetheless, wages in the whole economy do not seems to increase leaving the problem as generic. Nonetheless, Costco is less affected. With respect to trade, each firm has a specific policy to source its products locally or internationally; therefore, depending on customer's choices and preferences, they may be able to adapt or not without affecting gross margins. …show more content…
Competition is increasing among channels: some segments are literally flourishing (Dollar General for instance) but online retailing seems to be the major driver for expanding sales. In general, it seems most retailers are reducing the number of segments where they operate in terms of prices, products, customers, and geographies. In my opinion, gearing toward online by increasing tangible assets (the investment is mostly in warehouses and infrastructure with outsourced IT) is a plus and conversion/renovation is a prudent method to maintain leverage and preserve debt ratios in increasing interest rates