Wal-Mart: Kick 'Em When They're Down

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

It's been a rough year for Staples (Nasdaq: SPLS  ) , Office Depot (NYSE: ODP  ) , and Office Max (NYSE: OMX  ) ... but don't kid yourself, investor. It's about to get a whole lot rougher.

Over the past 12 months, shares of Staples have lost nearly 10% of their value as the market surged 21%. Office Depot has done even worse, down 31%, while Office Max has performed worst of all -- 48% of its market cap vaporized in just one year's time. So what does Wal-Mart (NYSE: WMT  ) go and do, seeing all these retailers down so much? It kicks 'em.

Last summer, Wal-Mart launched an August blitzkrieg against the office supply retailers. It placed full-page advertisements in some markets giving side-by-side pricing comparisons of "back-to-school" supplies it was selling, versus the same products sold by Office Depot. The upshot: Shopping Wal-Mart, and shunning Office-D, would save shoppers 45% off their kids' school costs.

It seems the ad campaign worked, because now Wal-Mart's ready to take the next step. According to a report in Stock Market Insider last week, the Bentonville Behemoth has drafted "contingency plans" for a massive invasion of the retail office supply market, going head to head with not just Office Depot, but Office Max and Staples as well.

Foolish takeaway
Office Max is already struggling with 1.8% operating profit margins, versus Wal-Mart's 6%, and Office Depot barely keeps head above water at 0.2%. Given the disparities, Wal-Mart's fully capable of undercutting both retailers on price, remaining solvent itself, but perhaps killing its rivals entirely. Only Staples, with its 6.5% margin, looks likely to survive this onslaught. Investor beware.

Wall Walmart follow through on its threat? Will Office Depot and Office Max survive? Add the stocks to your Fool Watchlist, and find out.

Fool contributor Rich Smith does not own shares of any company named above, but Motley Fool newsletter services have recommended Wal-Mart and Staples, have recommended creating a diagonal call position in Wal-Mart, and have recommended a short position in Office Depot. The Motley Fool owns shares of Wal-Mart. The Motley Fool has a disclosure policy.

Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors

Read/Post Comments (0) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1496358, ~/Articles/ArticleHandler.aspx, 10/25/2016 3:55:03 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,172.01 -51.02 -0.28%
S&P 500 2,143.31 -8.02 -0.37%
NASD 5,281.17 -28.66 -0.54%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/25/2016 3:39 PM
SPLS $7.50 Down -0.04 -0.53%
Staples CAPS Rating: **
ODP $3.17 Down -0.07 -2.16%
Office Depot CAPS Rating: **
OMX.DL $0.00 Down +0.00 +0.00%
OfficeMax CAPS Rating: *
WMT $69.42 Up +0.23 +0.33%
Wal-Mart Stores CAPS Rating: ***