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RICK WILKING

There's barely a hint of the worst recession since the Second World War in Wal-Mart Stores Inc.'s third-quarter results: Profit and revenue are firmly on the rise again.

Scratch a little deeper, however, and the picture is quite different.

The U.S. market is flat, while the rest of the world is in full recovery mood.

Wal-Mart, like other major international retailers, is experiencing a very lopsided global comeback. In the United States, sales are down, it's facing double-digit deflation in food and electronics prices and the holiday season is looking pretty grim.

Elsewhere in the world, it's almost as if the Great Recession never happened.

Wal-Mart's sales fell 0.5 per cent in the United States on a same-store basis, but shot up 12.1 per cent in the rest of the world, including gains in Canada, Britain, Mexico and China (measured in local currency).

Economists say the world is recovering much more quickly than the United States, where the housing collapse helped trigger a global recession.

"The United States looks kind of anemic compared to other places in the world," agreed Bill Cheney, chief economist at MFC Global Investment Management in Boston. "But I think it's going to catch up over the next few quarters."

More than other countries, the United States is facing some tough economic conditions that have put consumers in a frugal mood. During the boom, Americans overindulged on everything from cars to cellphones - much of it on borrowed money. But after the bursting of the stock and real estate markets, credit is hard to get and people are rebuilding their savings.

The key is the job market, according to Mr. Cheney. Unemployment has pushed past 10 per cent and the job market continues to shrink. Until the economy starts creating new jobs, consumers are likely to remain very cautious, he said.

Mr. Cheney expects the economy to begin creating jobs over the next few months, giving a much needed lift to the U.S. economy.

For now, however, gone are the days when shoppers would buy first and ask about the price later. Wal-Mart executives said price deflation is back.

Wal-Mart, often considered a barometer of the U.S. consumer, surprised analysts yesterday by reporting a better-than-expected profit of $3.24-billion (U.S.), or 84 cents a share, in the third quarter, up from $3.14-billion last year. Revenue rose to $99.4-billion from $98.3-billion.

The world's largest retailer isn't alone in experiencing the sharp dichotomy between the United States and the rest of the world.

McDonald's Corp. said earlier this week that its U.S. sales were flat in October (at stores open at least 13 months). Comparable sales in local currencies rose 6.4 per cent in Europe and 4.7 per cent in Asia, the Middle East and Africa.

At Wal-Mart, senior executives warned that U.S. sales in the critical fourth quarter could fall by as much as 1 per cent as customers fret about their jobs and their finances.

"We continue to operate in a very difficult economic environment," chief financial officer Tom Schoewe warned.

Particularly challenging for Wal-Mart is the sudden appearance of price deflation, said Eduardo Castro-Wright, vice-chairman and head of the company's U.S. operations. Deflation is the main reason its U.S. sales are down.

"Price deflation ... was well beyond what we had expected across many food categories as well as electronics," Mr. Castro-Wright said on a conference call with reporters and analysts. "Customers are very price focused today."

Wal-Mart said the trend is particularly evident in flat-screen TVs - one of its top-selling items. Wal-Mart sold 25 per cent more of them in the July-to-September quarter, but sales actually declined in single digits, according to Wal-Mart.

The average TV sells for 20 per cent less than it did last year.

It was a similar story in Wal-Mart's grocery aisles, where prices for meat, produce and dairy were all down sharply. Last year at this time, the talk was all about rising food prices.

Wal-Mart executives warned that deflation would likely persist for the next couple of quarters.

GLOBAL TALLY

Wal-Mart's third-quarter, same-store sales compared with the same period in 2008:

United States: Down 0.5 per cent

Rest of world: Up 12.1 per cent

Britain: Up 5.6 per cent

Mexico: Up 11.9 per cent

Canada: Up 1.2 per cent

China: Up 0.7 per cent

Barrie McKenna

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 10:16am EDT.

SymbolName% changeLast
MCD-N
McDonald's Corp
+0.35%283.02
WMT-N
Walmart Inc
-0.35%60.51

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