Recalls Dampen Holiday Cheer

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This is the time of year when retailers can't seem to move product out of their stores fast enough, but now we have Target (NYSE: TGT  ) and Wal-Mart (NYSE: WMT  ) scrambling to get some of their merchandise back.

The country's two largest discount department store chains have issued product recalls this week.

Wal-Mart's situation is the graver of the two. A 10-day-old baby died from a rare bacterial infection in Missouri, and it may have been the result of Mead Johnson Nutrition's (NYSE: MJN  ) Enfamil sold at Wal-Mart.

The retailer is pulling the infant formula batch with the problematic lot number as investigators determine whether the Enfamil powder, the water used to mix the formula, or something else led to the infant's tragic death.

There's obviously a fair chance that the formula itself had nothing to do with the baby's passing, and even if it is the case, it will be Mead Johnson Nutrition taking the real hit here. Shares of Mead Johnson were trading as much as 12% lower today on the news.

Target's recall involves excessive levels of lead paint in a kids travel case, but there have been no reports of any children getting sick. Target sold 139,000 of the Circo travel cases between April and August of this year, and the retailer is initiating a recall of the Chinese-made products because the surface coating on the cases exceed the federal lead paint standard.

Recalls happen all the time, and the real challenge is simply getting the word out. How many of those 139,000 buyers will ever know that their kids are toting around a travel case coated in excessive lead paint?

Retail isn't perfect, especially now, during the madcap holiday shopping season.

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The Motley Fool owns shares of Wal-Mart Stores. Motley Fool newsletter services have recommended buying shares of Wal-Mart Stores as well as creating a diagonal call position in Wal-Mart Stores. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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Related Tickers

10/26/2016 4:00 PM
MJN $80.57 Down -0.31 -0.38%
Mead Johnson Nutri… CAPS Rating: ***
TGT $68.59 Up +0.64 +0.94%
Target CAPS Rating: ***
WMT $69.59 Up +0.23 +0.33%
Wal-Mart Stores CAPS Rating: ***