Some of the world's biggest brands made headlines this week which, as you'll soon find out, isn't always a positive thing. Toyota's (NYSE:TM) legal problems have taken a turn for the worse, and Wal-Mart's (NYSE:WMT) sales are in a slight rut. On the bright side, Apple's (Nasdaq:AAPL) iPad exists – although it's still unclear what it actually does. But fear not – many other retailers also seem to be doing quite well. (What people buy and where they shop can provide valuable information about the economy. Find out more in Using Consumer Spending As A Market Indicator.)
In Pictures: Top 5 Reasons Why People Go Bankrupt

Toyota: Moving Forward (Insert Joke Here)
Toyota's troubles aren't over just yet. Last week, the National Highway Traffic Safety Administration revealed its plans to fine the Japanese automaker $16.4 million… yes, $16.4 million to a company that sold almost 2.5 million cars last year alone. But this lawsuit may just be the first in a long string, as emails and internal documents were released last week that stated Toyota executives delayed and debated the release of information pertaining to defaults in many of its models, which included sticking gas pedals and faulty floor mats. (To learn more, read Recall Recoil: Will Toyota Recover?)

This situation practically mimics the hardships faced by Ford Motors in the 1970s and '80s. The Ford Pinto's safety tests were highly suspect, as the bumpers of the cars were known to puncture the cars' fuel tanks, if hit at speeds over 30 mph. Ford's secret safety testing facility was supposedly aware of this issue but gave the car the green light anyway. The reasoning? The company believed it was more fiscally reasonable to pay off lawsuit monies than it was to recall and repair the 1.5 million Pintos and 300,000 Mercury Bobcats.

Unfortunately, the defects resulted in multiple deaths caused by fires, numerous lawsuits and eventual recalls. (Henry Ford made his dream of bringing the automobile to the masses a reality. Find out more in Industry Mogul And Industrial Innovator.)

Always Low Prices … Sometimes
Despite being known as the premier discount retailer, Wal-Mart's sales have slowed in recent months. The chain believes this is due to an overall decrease in electronics and food prices, and in return will be lowering prices on over 10,000 popular items. This action is being made in the hope of bringing middle-class shoppers back through its doors, as its competitors have been able to match (if not beat) Wal-Mart's prices on many items lately.

The price cuts will affect 3,700 U.S. stores, and Wal-Mart says this may just be the first wave of reductions. (We look at a retailer's inventory turnaround times, its receivables as well as its collection period, in Measuring Company Efficiency.)

Buy Low…
The other side of that coin is that the retail industry in general has jumped for March, 2010. Many retailers saw a double-digit increase in sales compared to last year's numbers, which could predict that consumers are ready to return to the aisles. Retail sales jumped ahead of analyst expectations, climbing by more than 9% while the street expected a move of only 6.3%. This trend in consumer spending has been ruling the retail environment over the past months, yet such a massive year-over-year jump was hard to anticipate. Department stores were among the best performers, with an average revenue jump of 12.3%.

Although this marks the fourth consecutive month of growth for the retail industry, investors are still weary and consumers are still gun shy when it comes to high-end and high-priced items, which could contribute to the summer lows we experience year after year.

Getting the Jobs Done
Apple's latest product, the iPad, was released on April 3, and its reception was more than warm. Over 300,000 iPad units were sold on launch day – a tremendous success, considering that the tablet/ebook reader/application magnet was verbally berated in the mainstream media based on its pun-friendly name and ambiguous functionality. In addition to the number of physical units sold, Apple says that 250,000 ebooks and over 1 million apps were also downloaded on launch day.

In comparison, Apple's previous major release, the iPhone, came out almost three years ago. At launch, it sold 270,000 units. (For related reading, see The Best Time To Buy An iPad.)

Wrapping Up
The issues Toyota and other car manufacturers are facing are not easing consumers' minds about high-end purchases. But this may be one of the contributing factors to the recent bump in low- and middle-cost retail purchases. In short, people still have a certain amount of disposable income, and if they're not going to buy $20,000 runaway cars, they have all the more freedom to purchase smaller personal items.

(If you're still feeling uninformed, check out last week's business highlights in Water Cooler Finance: Auto Hope, Bubbling Oil and Obamanomics.)

Related Articles
  1. Home & Auto

    Luxury Cars with the Best Resale Value

    Autos rarely appreciate in value. But if you want a set of wheels that'll least hold its value over time, these cars can go the distance.
  2. Stock Analysis

    How Expensive Is Whole Foods, Really?

    Learn about Whole Foods Market, Inc., and discover how Whole Foods pricing actually compares to that of other grocery store operations.
  3. Stock Analysis

    4 Quick Service Restaurants for Your Portfolio

    Learn about the four quick service restaurants with attractive investment theses and growth prospects that can be valuable additions to your portfolio.
  4. Stock Analysis

    What Makes the 'Share a Coke' Campaign So Successful?

    Understand how Coca-Cola implemented the successful "Share a Coke" campaign. Learn about the top three reasons why the campaign was successful.
  5. Stock Analysis

    The 6 Best Dividend Stocks in the Consumer Staples Sector

    Learn about the top six companies that make an attractive investment for investors looking for stocks for dividend income investing.
  6. Mutual Funds & ETFs

    Top 3 Consumer Cyclical Mutual Funds

    Obtain information on, and analysis of, some of the best performing mutual funds that offer exposure to the consumer cyclicals sector.
  7. Investing

    Procter & Gamble Restructures, Sheds 100 Brands

    All businesses face adversity, and Procter & Gamble is no exception. We take a look at recent developments affecting this global giant.
  8. Economics

    Explaining Manufacturer’s Suggested Retail Price

    The manufacturer’s suggested retail price (MSRP) is just what it describes – the price manufacturers recommend that retailers charge for their goods.
  9. Economics

    Calculating Cross Elasticity of Demand

    Cross elasticity of demand measures the quantity demanded of one good in response to a change in price of another.
  10. Personal Finance

    What to Collect: Apple Watch vs. Luxury Watches

    The "iWatch" is a new player in the luxury watch world. But will it stand the test of time? Some points for collectors to ponder.
  1. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  2. What are some common ways product differentiation is achieved?

    There are many ways to achieve product differentiation, some more common than others. Horizontal Differentiation Horizontal ... Read Full Answer >>
  3. What role does the OEM (original equipment manufacturer) play in the finished product?

    Original equipment manufacturers (OEMs) do not typically play much of direct role in determining the finished product. However, ... Read Full Answer >>
  4. What is the difference between an OEM (original equipment manufacturer) and a VAR ...

    An original equipment manufacturer (OEM) is a company that manufactures a basic product or a component product, such as a ... Read Full Answer >>
  5. Is the retail sector also affected by seasonal factors?

    Generally speaking, the retail sector is highly seasonal. Almost invariably, sales in the retail sector are highest in the ... Read Full Answer >>
  6. What has the retail sector evolved to its current structure?

    Retail is the catch-all phrase for the sale of final goods to consumers; a retail transaction is considered an "end" and ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  2. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  3. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  4. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  5. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  6. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!