Walmart and Starbucks---Recession indicators?

Intrigued by a 3/10 article on www.dailyyonder.com entitled "Walmart/Starbucks - Red/Blue" that looked at political preferences as reflected in the density of Walmart's and Starbucks' market coverage state by state, I decided to look at these retail behemoths and see how their predictive powers look in this current economic environment. They are opposites, and on the surface they are significant.

Starbucks is startling. Over the last twelve months Starbucks stock is down 41% while the S&P 500 is down 3%. So what, one could say, there have been lots of company specific reasons for this and their growth has stalled. What if, however, the primary reason for Starbucks' poor perfomance has been that with its high priced beverages it became an easy first luxury to go as the credit crunch began to evolve and consumer spending was diverted more and more to price inflating necessities like fuel and food. Is it possible that the reason for their poor performance was not overexpanding and diluting the culture, not introducing breakfast egg sandwiches that conflicted with that coffee aroma, not doing away with the manual expresso machines and going to the push button ones, not bad management, but just the fact that Starbucks, with its national ubiquity and premium prices, was on the cutting edge as a barometer of a recession in the making. Did Howard Schultz come out of retirement to tilt at windmills.

Walmart is a shorter term story and just the opposite. Over the last six months Walmart stock is up 18% while the S&P 500 is down 10%. So what, one could say, Lee Scott has addressed some serious issues aggressively and for the moment successfully. Could that, however, really account for a 28% outperformance relative to the S&P in just six months. What if Walmart, with its low price leadership, became the beneficiary of relatively more retail customer traffic as a result of the pinch that consumers were feeling by the end of the summer. At some point as consumers stretch their dollars, who cares if Target is more upmarket in its style and fashion or if "name brand" retailers were yesterday's preference. Did Walmart's revival come from management efforts or was it primarily an economic event, with its demographic telling us six months ago that the economy was seriously slowing.

This may be a somewhat whimsical analysis done with the benefit of hindsight, but I still wish I'd thought of it earlier.