War Doesn?t Deter Customers

Birds chirped, flowers bloomed and U.S. ground troops invaded Iraq.

It was the first day of spring — March 21, 2003.

After the first two days of the war, it looked like the coalition forces were well on the way to a rout in the land of Abraham, Noah and the Garden of Eden — a country where civilization began 6,000 years ago.

The flickering television images of gunfire and bombs were enough to mollify many Americans, who seemed more interested in barbecue than Baghdad.

Wal-Mart Stores Inc. of Bentonville, the world’s largest retailer, said the “CNN effect” had apparently subsided by March 21. Americans felt confident that the war would be brief, so they did what Americans do: They turned off the TV and went shopping.

“We were seeing normal shopping patterns by Thursday night [March 20],” said Tom Williams, a Wal-Mart spokesman. “The weather was breaking in the northeastern United States, which is very normal for this time of year. The key thing is that we see normal shopping patterns right now. Everybody is going about their normal routine.”

Williams said he visited four stores in Northwest Arkansas over the weekend after the war began, and all of them seemed to be busy.

“People are out shopping,” he said.

“It doesn’t hit us at home,” said Kathy Deck, an economist with the University of Arkansas’ Center for Business and Economic Research. “It doesn’t adversely affect the lives of the average consumer. Day to day, life goes on.”

Wal-Mart’s Spring Fling

Wal-Mart said sales dipped slightly from March 18-20, then took off like a Patriot missile on March 21. Two days after the first bombs rocked Baghdad as the U.S. tried to kill Saddam Hussein, Americans were stocking up on lawn and garden supplies and getting ready to fire up the barbecue. As soldiers in Iraq donned gas masks in case of a chemical weapons attack, suburban Americans prepared to battle pollen and swat mosquitos.

The best sales categories at Wal-Mart for the week when war began were pet supplies, automotive, paint and accessories, intimate apparel, lawn and garden, household chemicals and food.

Obviously, Americans can’t get enough intimate apparel during a springtime war.

In a weekly sales update, the world’s largest retailer said on March 24 that same-store sales are on track for a rise in the low-single digits in March and up in the high-single digits in April. The huge increase in April is due primarily to the fact that Easter falls in that month this year instead of March, as it did in 2002.

Wal-Mart said sales of many survival-type goods were also strong. Those included bottled water, canned meat, cereal bars, duct tape plastic sheeting and other pantry items.

In the March sales period last year, which included the Easter holiday, Wal-Mart’s same-store sales rose 9.5 percent, reflecting a 10.7 percent increase at the Wal-Mart division and a 4.1 percent increase at the Sam’s Club warehouse unit. Total sales for the Bentonville company jumped 14.5 percent to $21.5 billion for the period.

In the April sales period last year, Wal-Mart said same-store sales grew 3.3 percent, on a 3.2 percent rise at its Wal-Mart division and a 4 percent increase at Sam’s Club. Total sales rose 9.3 percent to $17.66 billion.

Market Roller Coaster

Fear of war had kept the stock market down for weeks, but when it became obvious that President Bush was going to invade Iraq, all that changed.

The week the war broke out was the stock market’s best since 1982. The Dow Jones Industrial Average was up 997 points (13 percent) for the week after eight winning days in a row.

But the weekend of March 22-23 brought troubling news from the other side of the world. Fighting was more fierce than expected in Nasiriyah, a key crossing on the Euphrates River. The Iraqis showed footage on television of dead and captured American soldiers. The U.S. shot down a British fighter jet. A U.S. soldier in Kuwait tossed three grenades at his superior officers, killing one and injuring 13. And the Iraqis claimed a farmer shot down a U.S. Apache helicopter with an old Czechoslovakian rifle.

Everything wasn’t going according to plan.

After hearing the bad news, rattled investors sent the Dow tumbling 307 points (3.6 percent) on March 24 to 8,214.69, the biggest percentage loss since Sept. 27. Wal-Mart dropped $2.15 per share (3.9 percent) to $52.52.

But the Dow was up again on March 25 (by 65.55 points, or 0.8 percent) as investors apparently realized the war wasn’t going to be a cakewalk, but the U.S. would win.

“The truth of the matter is the war has begun, and the market has little doubt about how it will end,” Deck said. “There’s little doubt we will be victorious.”

Deck said “embedded” journalists traveling with the troops are able to cover what is happening right in front of them, and that may have magnified some of the problems that gave investors the jitters.

“We are seeing the trees — each individual one,” she said. “We can’t see the big picture yet.”

Going to war initially boosted the stock market because the indecision was over, Deck said.

“We hadn’t been able to move forward in any sense,” she said, but added that a long war could be a problem for the economy. “It’s the overarching fear of the unknown.

“A quick, decisive victory would reassert the United States’ dominance and affect the economy. People relax and make some of those purchases that they’ve been thinking about for weeks.”

If weapons inspections had continued in Iraq, Deck said, “we would have been bogged down. None of the indecision in the economy would go away if we did that.”

“Wal-Mart is going to weather it well,” she said of the war. “All of the companies in Northwest Arkansas will, with comfort food and the like.

Tyson Foods

Shareholders of Tyson Foods Inc. can’t take much comfort in the Springdale company’s stock price, but they can’t blame the war for much of that.

Tyson’s stock dropped 71 cents per share to $8.14 on March 24. It gained a penny of that back the next day. Tyson’s stock has dropped from a 52-week high of $15.71 per share last July. But the share price was heading down before the war and actually recovered a little in the first days of battle.

Tyson spokesman Ed Nicholson doesn’t believe the war will have much effect on the company.

“People have to eat,” he said. “The question will be, ‘Will trends change?’ Will they stay at home more? Right now, those questions are difficult to answer. We would hope that our volume would be sustained, but it’s a difficult call right now. As of this moment, we’re still exporting products. There’s no noticeable decrease in any market channels. But it’s difficult to anticipate what might occur.”

Every year, Tyson produces about 13.5 billion pounds of beef, 7.2 billion pounds of chicken and 4.4 billion pounds of pork.

Nicholson said travel had been restricted for a week after the war began, but no additional security measures had been implemented. Tyson Foods did beef up security after the terrorist attacks of Sept. 11, 2001.

“There were some added measures taken after Sept. 11,” Nicholson said. “Over the past few weeks, nothing has changed drastically, but [Sept. 11] did precipitate an evaluation.

“Basically, we’re operating a business that requires a certain amount of security even in the best of times. We’re producing a perishable product that could be subject to tampering.”

Nicholson said Tyson Foods had improved its corporate hotline so employees can call in to see if they need to report to work the day after an emergency. He said that hotline can take up to 300,000 calls an hour.

War and the Economy

Many people believe war is good for the economy, but historically, war has been good for the U.S. economy when the U.S. was winning.

A bear market held sway from the time of the collapse in October 1929 until the Battle of Midway in World War II. The decisive military victory in June 1942 improved the public mood and the stock market reflected that. There had been nothing but bad war news until the Battle of Midway.

For the next 24 years, until 1966, the stock market boomed. Then, as the war in Vietnam turned ugly and public protests began, the bear was back. The market was on a downward spiral for the next 16 years.

The bulls returned to Wall Street in 1982 for an 18-year run. Three years ago, that streak ended when the technology boom went bust.