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Japan Disasters Affect U.S. Company Profits

The huge earthquake followed by a Tsunami in Japan that happened a few weeks back are now hurting the sales of U.S. companies that are serving Japanese consumers. Although Japanese shoppers are showing a little resilience, large U.S. companies like Coca-Cola, Coach Inc., and 3M Co. are feeling the effects of the disaster that struck Japan.

Japan has the world’s third largest economy and although people there were tight-fisted with money even before the March 2011 catastrophe, the country remained to be a primary market for a lot of companies.

Coach, a world-renowned maker of signature handbags and other accessories, generates almost 20 percent of their sales from Japan. The earthquake, its aftermath, and the current nuclear disaster Japan is facing right now could significantly reduce the company’s projected annual earnings by 2 to 3 percent; that is 5 percent of Wall Street’s yearly profit forecast.

On the other hand, Muhtar Kent, a Coca-Cola Chief Executive, said on a conference call that the supply chain is under stress due to Japan’s inability to provide some raw materials needed for production. Indeed, Coke said that the recent events in the country have hampered a lot of bottlers’ capacity to produce enough products for the anticipated growth in demand on summer.

Wal-Mart said that the best way to stabilize sales in Japan is to reach out to them. The company has shipped water and food from Canada to meet the demands in their 400 stores in Japan. Wal-Mart Executive Mike Duke said that doing so will really help consumers in Japan recover from the disaster.

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Wal-Mart Plots Better Business

Wal-Mart fights back competitors by emphasizing low prices and adding back thousands of products in store. The company is also planning to expand into cities and neighborhoods where other people dare not to go.

Three years ago, Wal-Mart led several dollar stores for selection, convenience and price. However, it is now losing customers and revenue, including smarting because of some poor decisions.

Although Wal-Mart is not in danger of giving up its place as top of the retail food chain, several competitors have already begun chipping away some parts of its dominance.

According to the International Council of Shopping Centers, revenue at Wal-Mart stores, which are open at least a year, has decreased by an average 0.75 percent each quarter over the last year. But, revenue increased by an average of almost 1.7 percent at Target, 5.9 percent at Family Dollar and 8 percent at Costco.

Wal-Mart CEO Mike Duke said in an interview with The Associated Press that they are running a better business now since competitors brought them to raise their own game. Wal-Mart anticipates that the decline in revenue will stop when it releases results from its fourth quarter this month.

Not like other stores, Wal-Mart thrived in late 2007 when the US when into a reccession. Its primary customers from households bought even more. It became the only place where many people shopped.

The entire $27 billion revenue growth of Wal-Mart for the year ending in January 2009 came from larger demand for basic items such as foods, household goods and pharmacy. That year, shoppers spent almost a quarter more on basics.

The company is also completing a major renovation to address shoppers’ complaints that its stores were messy. It widened aisles, removed clutters, enhanced lighting and lowered shelves.

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