Wal-Mart (NYSE) looking to keep growth alive is looking at building huge warehouses and competing against Amazon in the E-Commerce space. A couple of Black Swan events to think about. Wal-Mart given its rise, does have a master of the universe mentality. Wal-Mart destroyed small downtown neighbourhoods and sanctified big box retail in suburban locations. They offered the cheapest price and turned everything into a commodity. The product line is the me too stuff or block buster products guaranteed to be hot. No real merchandising designed to offer and entice.
Yes Wal-Mart is building large warehouses. But a warehouse is a cement floor, cheap aluminum walls and a roof that hopefully holds up. 66% of the US population lives 5 miles away from a Wal-Mart store. So a fleet of trucks should be able to deliver very easily. Building warehouses and buying trucks is not difficult. Running a mean and lean logistical infrastructure will be difficult. Wal-Mart outsources major components and relies on intimidation to manage vendors. They do not have a holistic self managed culture.
Wal-Mart depends on consumers coming into the store and not remembering the cost of commuting. Cloud e-commerce will need to absorb the cost of delivery. With the lowest price in the land the margin does not have room for further discounting. You will not be able to make much money on cheap toilet paper or cases of heavy soft drinks with razor-thin margins. When you pick up some cheap sweat pants and a few T-shirts you are not interested in a delivery charge. When you buy something fashionable from Amazon the delivery charge is negligible after all the value added.
Amazon meanwhile is leading in e-commerce by offering value added products not the cheapest. The e-commerce business will be driven by software in the cloud. Wal-Mart buys its software and relies on third part developers to keep it fresh and competitive. Wal-Mart has not varied its model from day one.
So if someone is expecting battle between an Arkansas Mule and West Coast Cool my money is on cool. Wal-Mart is not a true innovator.
George Gutowski writes from a caveat emptor perspective. Personal preferences tend to West Coast Cool. I rarely need an Arkansas Mule.
Wal-Mart (NYSE:WMT) claims that US consumer is under buying so they are under-performing. You see it’s the IRS’s fault. Tax returns are not as big as expected so the consumer is not spending.
Really. Wal-Mart it’s a coincidence that the interim head of the IRS had to resign because of over zealous treatment of Tea Party tax status. So when Q1 comes out flat blame the tax man.
Hope investors forget that there are huge markets besides the US. Whats happening there. Hope investors forget that Macy’s seems to be on the rebound. Hope investors forget that the US economy has been on shaky ground since 2008.
What we are probably seeing is the end of Wal-Marts simplistic business model. Cut throat price slashing. The consumer who can only show up if the price is very low is tapped out. There are no other reasons to shop at Wal-Mart other than low price.
Wal-Mart branding is 200% cheap price and no other business input. Other retailers have not followed to the same extent as they felt they had something to offer. Service, selection, shopping experience.
Yes Wal-Mart obliterated many traditional competitors. But that play is coming to an end. This may be the high water mark for Wal-Mart. Anyone in business realizes your customers need a capacity to pay. Otherwise they are not customers.
George Gutowski writes from a caveat emptor perspective.
A protest in Utah against Wal-Mart (Photo credit: Wikipedia)
Wal-Mart (NYSE:WMT) is the retail stock everyone loves to hate. It has destroyed many smaller main street businesses. Imported tons of cheap goods from wage slave countries and helped to destroy American jobs. Need I go on.
But so far investors have stayed with them. The stock is up from $60 range to $72 with a serious flirtation around $78. not a tax loss selling candidate for 2012. Dividend yield is 2.2%. Could be better but why enrich the controlling shareholders? Money flow is 1.16 providing a mild buying pressure. Short sales stand at around 1.26%. Do not expect the Walton family to sell. Shorts are so small there is no bullish drive. Mexican bribery scandals do not seem to affect the stock. Attempted inroads to India are still more conceptual and not accretive. The investor is in neutral. Opinions are not set to change radically.
Obama is back for four more years. You can expect the federal government to encourage labour activism. The left-wing press is beating the drum about low wages and unfair working conditions. Wal-Mart controls about 10% of the retail economy (ex-auto) cannot run away. The occasional store closes with new ones opening. Their size prohibits retreat. Unlike manufacturers who can easily relocate to low wage environments Wal-Mart needs to be close to the consumer.
Healthcare costs. Well lets just say they have over 50 employees. Know what I mean. Wages do not attract the best of the retail business. Unions will ultimately seek to sway public perception and hurt the brand in the mean-time. No one is proud they shop at Wal-Mart. The market goes there because of low price. This is not strong consumer engagement. Wal-Mart has a reputation for being tone-deaf with social relations. Just look at the cold war they started with HuffPost. So read the article link below.
Social Media drives perception. Wal-Mart has about 302K followers. This can be easily overwhelmed. The right combination of social response can easily back fire on Wal-Mart and drop their market share in America. So when picketers get hassled on the picket line and the street theater tactics start-up Wal-Mart will be at a disadvantage. They do not know how to fight that battle. It probably has not occurred to them that it could become an issue.
So if the Occupy Wall Street protests fizzled Occupy Wal-Mart may soon be upon us.
Far fetched. Thats what black swan events are all about. But all the ingredients are right there just bubbling below the surface. So as an alternative JCPenney (NYSE:JCP), Target (NYSE:TGT) and Costco (Nasdaq:COST) may soon be feasting on the carcass that was once Wal-Mart.
George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti.
Huff Post article Wal-Mart does not like http://www.huffingtonpost.com/2012/12/01/walmart-health-care-policy-medicaid-obamacare_n_2220152.html?utm_hp_ref=business
English: simulated Wal-Mart logo (Photo credit: Wikipedia)
Wal-Mart (NYSE:WMT) is dragging its feet when it comes to bribery allegations and investigations. Wal-Mart shared that a previously disclosed investigation into bribery at its overseas units expanded into markets including Brazil, China and India.
Well of course it did. Regardless of what you think of Wal-Mart, operating in Brazil, China and India on the scale that they are interested in requires lots of local co-operation. The ethics and morals not to mention legal structures in those parts lends itself to bribes.
At this point almost all if not all the alleged bribes were to further Wal-Mart interests. There is little to no sign of personal enrichment at the expense of Wal-Mart. So the investigation will uncover lots of morally repugnant we must hold our nose details. There will be a fine which will amount to a speeding ticket and then back to EPS and what do we need to do to make it grow.
The New York Times (NYSE:NYT) article focuses more on how Wal-Mart managed the hot potato and not on why the local culture forced it into this behaviour pattern.
Faux outrage everywhere. The Mexican lesson to other businesses is to pay the bribe. NYT claims some $32 million were paid out. Small price to achieve the growth the Mexican market gave them.
This will go away. NYT articles to the contrary.
George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti
English: Walmart Home Office, the headquarters of Wal-Mart – Bentonville, Arkansas Español: Walmart Home Office, la sede de Wal-Mart – Bentonville, Arkansas (Photo credit: Wikipedia)
Wal-Mart (NYSE:WMT) is upsetting the communist party in India. While I’m not normally a fan of Wal-Mart I do like upsetting the communists. Wal-Mart has vigorously denied wrongdoing and said it had acted in compliance with all Indian laws.
M.P. Achuthan, a Kerala member of the upper house of parliament for the Communist Party of India, wrote to India’s prime minister Manmohan Singh that Wal-Mart had “clandestinely and illegally invested”.
Most Wal-Marts are big ugly boxes so I’m not sure how the clandestine part works. Illegal well maybe you got something there. India has so many regulations you are bound to have run afoul of something.
Wal-Mart has recently run afoul in Mexico with bribes and skullduggery. Legal fight under way. Wal-Mart has bloodied its nose in Germany and Japan where they have lost money because their model did not work.
Now the communists in India are complaining. Wal-Mart is culturally tone-deaf. If I were a communist I would let them in and let them roll the dice in the huge Indian market. Wal-Mart is leveraging up with billions of dollars of cheap debt. They are investing in Indian rupees. The entire expansion is one big unhedged foreign exchange exposure. But then again the communists don’t see it that way.
If I was an investor I would be concerned about Wal-Mart getting in and then blowing their brains out all the while borrowing huge gobs of US dollar capital.
Image via Wikipedia
Sears Holdings Corp (Nasdaq:SHLD) seems to be enjoying a classic short squeeze for now. Many analysts are on public record about the negative cash flow implications. Management seems oblivious to the entire conundrum.
Check out the recent skirmish in the Canadian market where Sears has long been established and trusted. They just announced huge price reductions for about 5,000 items. Folks that’s a lot of price reduction. So why shoot your foot off?
Target will be opening up 100’s of new stores within the next year. Wal-Mart is already a major factor putting up huge stores everywhere and anywhere. So the best that management can come up with is to cut prices. No merchandising strategy. No customer experience strategy. No …well no strategy. Just cut prices and hang on.
Black Swans ahead!
George Gutowski writes from a caveat emptor perspective.
Image by roboppy via Flickr
Wal-Mart (WMT) cannot catch a PR break. They recently allowed a good natured vice president to appear on the Colbert Report. The Wal-Mart PR team could not possibly understand that Colbert is a satirist. Much like Samuel Clemens; just add a modern urban liberal zeitgeist.
Wal-Mart may covet NYC lease deals but they do not understand modern urban liberal zeitgeist. The poor vice president did not extend the Wal-Mart brand or create value for shareholders. The Colbert nation is familiar with the probable approach interviews may take. Wal-Mart did not gain any yards.
Makes you wonder if the Wal-Mart Dinosaur is sufficiently engaged with it’s revenue base.
Disclosure: “George Gutowski” writes from a “caveat emptor perspective”. I hold no positions in stocks mentioned in this post. I have no plans to initiate a new position within the next 72 hours.