Is Wal-Mart Heading for Disaster?

Wal-Mart (NYSE: WMT  ) was once the shining example of how to run a growing U.S. retail chain efficiently and profitably. Sam Walton built stores in cities and towns neglected by big-box stores, and once the company built the scale needed, it was able to squeeze suppliers to provide better prices and different products than its competitors. Combine that with a superior inventory management and distribution system, and you have a market-crushing company that beat Kmart, Target (NYSE: TGT  ) , and others to dominate discount stores.

This strategy worked for more than four decades, but nothing works forever, and cracks have recently formed in Wal-Mart's foundation. Cost-conscious consumers have gone online, and consumers who have the ability and the cash to shop at brick-and-mortar stores are looking for more than just low prices. Target has taken design to the masses in everything from clothing to kitchenware, targeting a higher end of the market than Wal-Mart and gaining shares in the process. That focus has resulted in not only higher margins than Wal-Mart but also stronger growth in the U.S.

Target isn't the only one slowly eating away at Wal-Mart's retail lead. Costco (NASDAQ: COST  ) is outperforming Sam's Club by most measures, despite a bigger footprint. Then there's Amazon.com (NASDAQ: AMZN  ) , which is taking share from everyone and is the new elephant in the room. 

Below I've laid out how U.S. sales at Wal-Mart, Target, Costco, and Amazon have changed since 2008. The growth rate in each column is for all of U.S. operations versus the year before.

 Brand

2009

2010

2011

2012

Through Q2 2013

2008-2012 Growth

Wal-Mart

6.8% 

1.1% 

0.1%

1.5%

1.2% 

10.3%

Sam's Club

5.6%

(0.4%)

3.5%

8.8%

1.4%

11.5%

Target

3.7% 

2.8% 

3.3% 

6.8%

2.4% 

17.9%

Costco

(2%)

4% 

7% 

7% 

6% 

26.1% 

Amazon

25.5%

45.6%

41.4%

28.4% 

25.5% 

231.9%

Note: Costco's 2013 growth is full fiscal year. Amazon's growth rate is for North American retail.

You can see that Wal-Mart has grown more slowly than each of these competitors over the past three-and-a-half years and is underperforming its competition in both discount and warehouse sales. Target was once the little brother Wal-Mart could brush off as a cute competitor, but the company has clearly shown that a focus on design and quality can overcome any price advantage Wal-Mart has.

More shocking to me was the fact that Costco grew 26.1% from 2008 to 2012, more than double the rate of Sam's Club. Costco is also larger than Sam's Club, with $97.06 billion of revenue last year versus $53.8 billion, so it's growing more quickly from a bigger base. Long term, this will eat away at Sam's Club's potential growth, just like Wal-Mart did to Kmart.

Online retail changes everything
I think it's clear that Wal-Mart is underperforming direct competitors Target and Costco, but Amazon is the biggest threat facing Wal-Mart. The dot-com company has fundamentally changed the way that customers shop and offers a great alternative for those shopping strictly on price, a place where Wal-Mart was once unbeatable.

It's not as if Wal-Mart didn't see online retail coming; it just doesn't have a great answer to it. Wal-Mart was built on a superior distribution network and lower operating costs than the competition, but it's built to serve brick-and-mortar stores. Amazon changed the game with giant warehouses and free shipping to individual customers. But the biggest differentiator may be that Amazon can aggregate many sellers through its online store and offer them space for rent in its warehouses. This allows Amazon to increase the number of products it offers without taking on the added burden of inventory. 

Wal-Mart has dabbled in this area, but in general it still owns the distribution center and the inventory. Amazon is making a fundamental shift in retail and Wal-Mart may not be agile enough to make that kind of shift.

A search for identity
One of the fundamental challenges facing Wal-Mart in competition against Target, Costco, and Amazon is that it's lost its identity. The concept that dominated rural America doesn't work in suburban or urban America, and as the company has adapted it's lost a single brand. Is the upscale-looking Wal-Mart in a nice suburb the one I should identify as Wal-Mart or is it the Supercenter that's full of cheap stuff?

Online is even more difficult. Amazon is the first stop for millions of customers, not Wal-Mart. Those habits are tough to change. Wal-Mart simply isn't identified as an online company, and Amazon will continue to eat its lunch if it can't make that shift.

Back to Kmart
Wal-Mart isn't yet on the brink of disaster like Kmart was in 2000, but the fall of Kmart was faster than most people think. They could see Wal-Mart coming, but with a 30% market share of discount store sales in 1990, they seemed to have a strong lead. As recently as 1999 and 2000, the company grew sales 6.6% and 3.1%, respectively. But the wheels were off by 2002, when sales dropped 14.9% and the company began closing stores. It's a cautionary tale about what happens to a retailer that stops growing.

Wal-Mart is on its fourth straight year of near-zero growth in the U.S. and same-store sales are slowly trending lower. Will it become Kmart? I don't think it'll see the rapid decline Kmart did, but it may be Wal-Mart and not Target or Costco that takes the hardest hit from online retail and the ever-changing consumer. That's a shift that seemed unthinkable a decade ago. 

Prepare for the changing face of retail
To learn about two retailers with especially good prospects, take a look at The Motley Fool's special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they’re planning to ride the waves of retail's changing tide. You can access it by clicking here.


Read/Post Comments (63) | Recommend This Article (88)

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.

  • Report this Comment On October 10, 2013, at 2:36 PM, Tiimotley wrote:

    I wonder how much of Walmart's 4yr stagnation is due to better informed Consumers increasingly aware of how despicable a Corp Walmart is and voting with their feet and wallets?

    Walmart is now synonymous for their Main St/small town killing practices, their ultra-low wages, part-time benefit avoiding contracts. Plus increasingly their stores look a total mess, are badly stocked and their Staff look disengaged and tired. Maybe people are realising that in the long-run it actually damages the economy to run a Business this ruthlessly?

    Costco for example is known for being a fair Employer who pay and treat their staff decently, Target is known for giving back to the Community in various ways. Maybe people are simply tired of Walmart's behavior and what it represents?

  • Report this Comment On October 10, 2013, at 2:48 PM, Sarentack wrote:

    I agree with you Tiimotley.

    It is a pretty despicable place to work, I worked there and didnt last 4 months due to the politics they play, I felt like I was working with a bunch of Special Ed students.

    I believe one of walmarts biggest problems outside of not being part of a union is the fact they profile who they want to hire, often times through background checks its the people they know they can run over. But that is not the only problem, their products............Its like I go there looking at some things in detail, its cheaply made garbage and its over priced. To Be honest, I can find better Chinese crap online at over 50% cheaper in price, thats the real sad part in all of this, perhaps consumers is getting smarter about it as well, I think the only thing Walmart really has going for it is some of its grocery selection, but even then its limited as I find myself shopping at other local markets because they are cheaper.

  • Report this Comment On October 10, 2013, at 11:06 PM, farmer37 wrote:

    several days ago you recomended walmart , today you point out how bad they are & will be . getting worse .i am at the point where i can not even trust the fool

  • Report this Comment On October 11, 2013, at 12:36 AM, 1JenniferB wrote:

    Check into the "Breakfast in the Class Room" that walmart is sponsoring at towards $300Billion + a year. Giantic tax write off for them, fattening our children and........... is it possible that they get to dump their extra foods?

  • Report this Comment On October 11, 2013, at 12:59 AM, rst605 wrote:

    Wal-Mart was built on giving the best service to its customers and employees. Today when you go into a Wal-Mart the associates walk right on by the customer. They never ask if I need help and when you are needing help with something they are out of sight. Amazon has great customer service by phone, chat, and email. I very seldom look at the Walmart website or even go into the store anymore. If I visit a store I will go to the smaller store with the great customer friendly people. Walmart is out of touch with the consumer and their needs.

  • Report this Comment On October 11, 2013, at 3:00 AM, bobuc wrote:

    How soon memories fade.

    From Time:

    At the onset of the recession, however, Target and Walmart saw their fortunes flip. Target's same-store sales have fallen for eight straight months; Walmart's have risen for 22 straight months. Target's 2008 same-store sales fell 2.6%, while Walmart's rose 3.3%. More recently, Target's February sales dropped 4.1%, while Walmart enjoyed a 5.1% jump.

  • Report this Comment On October 11, 2013, at 4:00 AM, mikeha2 wrote:

    Timotley is right on with all that he said. I used to work for Wal Mart and in 50 years of employment they were the first employer I quit on. They are unprofessional, disrespectful, condescending and down right nasty to their employees.

    Why do they look disengaged and tired? Thats because thats the way they are treated.

  • Report this Comment On October 11, 2013, at 4:52 AM, bobcat33 wrote:

    Timotely and Mike are correct. I too worked there for a short time. Short time, since I did NOT really expect to run for 8 hours and minimum wage, while being disrespected by the "mgr" that refused to offer the "training" they kept telling me they'd give to help me fit their demands better. I'm saying not 5 minutes of training, NO information at all, just "go to it", requiring me to get clues from a coworker just to begin the job expected. I worked harder on that job than I have in years, for a fraction the pay, and finally gave notice, their expectations, and pay couldn't be further apart. They spent an hour on "avoid unions, they are not your friend", and NO time sharing useful details like how to read the labels to place product more efficiently, which they just expected to happen spontaneously.

  • Report this Comment On October 11, 2013, at 5:00 AM, doawithlife wrote:

    I wonder how long before people realize Amazon isn't much better then Walmart now.

    Remember when they had American's running the phone center 24/7. I stopped shoping at Amazon after dealing with three foriegners in a row that couldn't help me, much less speak English. Now they are doing 24/7 video chat with the new Kindles, with the center based in America. So you have to buy a Kindle to get customer service from an American?

    Such a patriotic and carrying company to send as many jobs as possible to India.

  • Report this Comment On October 11, 2013, at 5:05 AM, urngoodhands wrote:

    I think the core issue that Walmart needs to contend with is the simple fact that so many people literally HATE shopping there. Let's face it... it is NOT a happy place! It is a depressing dismal almost-oppressive experience. And saving 11 cents on a bottle of shampoo is not enough of a motivator for most people to go shopping there in spite of that.

    I mean yes, they do some really good things for the community, but at the end of the day... the don't seem to address the needs of their CUSTOMERS. And certainly one of those needs is to NOT feel depressed about having to shop there.

    Address that issue, and they might regain market share.

  • Report this Comment On October 11, 2013, at 8:29 AM, djefft wrote:

    in jersey very few wm stores are allowed to be "supers". so we have mostly regular stores crammed with as much food as local towns will allow. thus we have crowded and dirty stores for the most part. just makes it easier to only go there when you only have to as a last resort. cheap prices and "cheap" chineese products aren't consumer friendly all the time. sorry wm. the quicker your demise the better fo the shopping public.

  • Report this Comment On October 11, 2013, at 9:50 AM, itisme2 wrote:

    I don't care where I shop, as long as it is close by, quick and have what I want, friendly workers, clean, and low prices why pay more at one store if I can get it somewhere else cheaper.

  • Report this Comment On October 12, 2013, at 12:16 PM, AnsgarJohn wrote:

    Kmart's decline was partly because of focus on optimizing gross margin %'s instead of free cash flow; http://www.dbusiness.com/DBusiness/July-August-2010/Polyeste...

    See also Made in America by Sam Walton -> How we closed the door on variety store thinking.

  • Report this Comment On October 12, 2013, at 2:24 PM, hvancura1 wrote:

    I used to shop them weekly for groceries and sundry items. The convenience of one stop shopping and low prices was the appeal. Over the last several years the stores I would frequent have become unkempt if not downright filthy and the checkout lines are way too long as they don't man enough checkouts. Too often they are out of stock on the items I need. I stopped shopping there a few years ago. I probably pay a bit more but my weekly shopping trip is now much quicker and stress free. All this on top of their shabby employment practices puts them at the bottom of my list.

  • Report this Comment On October 12, 2013, at 2:59 PM, chopchop0 wrote:

    This kind of article was written in 2006 when wmt was under 50. Hopefully this drivel will pound the price down again so I can get more

    Long wmt for years and very happy with my returns. Wmt will thrive and will be able to survive

  • Report this Comment On October 12, 2013, at 3:32 PM, mikecart1 wrote:

    Wal Mart is terrible not because of competition IMO but because of themselves. The stores are laid out terribly. Whenever I go, I spend 30+ minutes trying to find one item that I could easily find for the same price online in seconds. Often the stores are dirty with merchandise on the floor, not stocked properly, or not put in logical order.

    If I want to get soap for example, it is located in at least 3 locations in the store about as far apart as possible. And when the store is filthy, it attracts filthy customers. People are willing to pay a little more at Target because they keep their floors polished and their merchandise in order.

  • Report this Comment On October 12, 2013, at 5:02 PM, Kurt8949 wrote:

    Most of the comments regarding WM are written by males who do not understand WM marketing. Women in general do more shopping than do men. The items that they look for may be moved from previous locations by design. If a woman can't find what they are after they will look around until they do, During these treasure hunts they more often than not will see something that they might need, or want, and buy it. Impulse buying is what they depend on and they are the masters at this strategy. They offer so many items that most women love to shop there, especially when they find the 'clearance' aisle or some item that has been drastically reduced because they need to move the items out. WM will never go away, but it needs to look closely at why its market share if shrinking.

  • Report this Comment On October 12, 2013, at 5:48 PM, anartistindc wrote:

    Walmart has serious image problems, from being the butt of lowbrow humor with sites like http://www.peopleofwalmart.com/

    to repeated class-action suits and stories about gender, age, and ethnic discrimination. The lawsuits and complaints lead to further ridicule on the late night shows.

    It's principal pluses, cheap, or the only game in town [in less desirable venues], do not add to its cachet in the markets they want to break into.

    Does a business need to expand to survive? Why try to enter these markets?

    They might do better developing stores for underserved African villages.

  • Report this Comment On October 12, 2013, at 7:16 PM, Rundog999 wrote:

    The U.S. economy in general is headed for disaster when the majority of consumers are struggling to get by due to inability to earn a living wage. Walmart epitomizes the problem. Its entire business model is premised on paying substandard wages and not providing benefits to most employees. Walmart then turns around and blames everything but themselves for consumers not having money to spend in its stores. Duh. Henry Ford understood this problem and made sure to pay his workers enough money to buy the product they were making. A healthy economy requires this balance. When the pendulum swings too far in one direction -- as it has over the last 20 years or so with all the wealth accumulating in the top 1-2% of society -- inevitably the economy is going to suffer. Business models such as Walmart's are ultimately doomed to fail.

  • Report this Comment On October 12, 2013, at 11:12 PM, vostro wrote:

    Does anyone else remember when Walmart sold goods "Proudly made in USA?" Now you can't find hardly any!

  • Report this Comment On October 12, 2013, at 11:25 PM, Corsair3117 wrote:

    I don't own WMT and notice that much of their share price woes can be traced duration-wise to their foolish "match the lowest price" strategy.Good for consumers but not the bottom line. So, far from being the "evil empire" , too-low prices rather than the litany of Big Labor smears trotted out here by the usual suspects on an almost-hourly basis .

    Frankly, if the chain falls off severely, it will ease the mall traffic next to my favorite supermarket making me a happy camper but , as of now, it's pretty busy and the cart pushers show none of the sour and glum pusses that surely are worn by many angry posters here and-come to think of it-the two area WMTseem to have no more help wanted signs than the other stores in the retailers nearby. My last comment is just that the WMT (surely not a pretty thing) is no worse than TEVA over the last year and WMT pays a solid dividend. Yet Teva is is lauded here much more often than not. Sometimes I wonder if this is a stock site or MF is a political forum

  • Report this Comment On October 12, 2013, at 11:28 PM, Corsair3117 wrote:

    Typo..should have been WMT and TEVA CHARTS! The baseball game distracted me-sorry <g>

  • Report this Comment On October 12, 2013, at 11:29 PM, truthbytyping wrote:

    Many negative comments here are union plants. Don't fall for the propaganda.

  • Report this Comment On October 13, 2013, at 8:45 AM, HanSoLow wrote:

    It seems that many who have posted here think that an ENTRY level job must be able to provide the primary bread winner of a family enough money for the duration of that family's existance. This line of thinking is very silly. Why pick on Walmart? It is a VERY large and easy target. It's one of the largest employers providing Opportunities to those that are seeking work, a worthy pursuit. Is it not commonly expected that a person who gains employment in an ENTRY level job will soon either move up in the same company or move, with the skills gained (showing up on time, properly dressed/groomed, proper employee/customer social interactions), to another company??? Granted, training for said skills vary at each company and certainly Walmart might be lacking in that area.

    From an investment perspective, Walmart must balance convenience of obtaining a product(s), product availability, and customer service in order to grow sales. I recently used for the first time one of the Self-check out stands. I had a minor hitch with weighing some apples. An employee quickly came over and corrected my problem. The process took a little bit longer; however, I'm sure I will be faster next time. Walmart must love this because it lowers their labor cost. Technology is and will continue to make businesses more productive and push out labor that is not worth their cost. Liberal policies push up Labor's costs to the Entry Level Job seeker's detriment. Why is youth unemployment so high?

  • Report this Comment On October 13, 2013, at 9:55 AM, cmalek wrote:

    From an investing perspective, WMT has been a great stock. From a human perspective, it is not one of the top 100 (or 1,000) companies to work for.

    From a shopping perspective, I do not really see the Wal Mart motto "everyday low prices". With careful shopping and the use of other stores sales, I have been able to consistently beat WalMart's prices. One has to be an "educated consumer" and not shop WalMart just "because it is convenient."

    I shop/visit more than 10 WalMarts and Super WalMarts in a 5 state area (NY, NJ, Mass, Conn, RI) on a semi-regular basis. All the stores have problems with personnel. Employees are few and far between. When found, they are uninformed about merchandise other than the one they work with. Contrast that with Lowe's or Home Depot or any department store where the employees know where everything is in the whole store. Shelves many times show big, empty spaces where merchandise ought to be. Merchandise is strewn about willy-nilly, especially in the apparel areas. The non-food areas of the stores look like dingy warehouses. Racks are crammed together so close that it is hard to move between them. Displays narrow down the aisles to barely the width of a shopping cart. Even during the busiest times only about half of the registers are open, resulting in long lines.

    It seems that since Sam Walton died, his stores have been on a downhill slide.

  • Report this Comment On October 14, 2013, at 10:31 AM, overley wrote:

    I would add that competition from dollar stores such as Dollar General have contributed to their stagnation. I live in a rural area, and there are several dollar stores within several miles of me, and their numbers have doubled in the past few years. The dollar stores do have name brand products, groceries, and a limited, but solid selection of items. You can also get in and out of them in a few minutes, versus an hour at Walmart. They have competitive prices, and the employees seem happier than the average Walmart employee. I don't see Walmart disappearing, but I do see them not growing much from here.

  • Report this Comment On October 14, 2013, at 10:48 AM, hbofbyu wrote:

    Walmart represents America's rush to the bottom. When all you are measuring is efficiency, everything else suffers.

  • Report this Comment On October 14, 2013, at 11:02 AM, williambonney wrote:

    I shop at WalMart because I hate the greedy unions. I love the fact that they make our children fat. I blame EVERYTHING on WalMart. lol lol

    The real problem is that they run out of goods and when you approach the manager they say it is the vendors fault!!!

    Always out of ammunition. 8 months and only weird calibers in the store that no one wants.

    I suggested manufacturing their own ammo as sporting goods stores and internet are also out.

    In one ear and out the other.

  • Report this Comment On October 14, 2013, at 11:40 AM, Risky88 wrote:

    store is disgusting and their produce is even worse.

    I only buy motor oil and filters. I try to get the heck outa there as quickly as possible. Nothing like a target or amazon.

  • Report this Comment On October 14, 2013, at 11:51 AM, adasand wrote:

    Walmart will fail, walmart is the probably the worst company in the world. It definitely will fail, I am sure Motley fool investors dont think so as you'll pray to Buffett, I like Buffett btw, but Walmart business model is not going to last in a progressive world, all those people that bash amazon, are just conservatives.

    We are seeing the crushing of conservative values ie, paying the poor a dirt cheap wage for their work, inequality to different people etc. WMT is a good example of modern day conservatives. WMT will perish along with the republicans in a decade or so.

  • Report this Comment On October 14, 2013, at 11:51 AM, Mathman6577 wrote:

    I was just waiting for the anti-Walmart stories and comments (refreshing change from all the anti-Apple stories). Here it is I guess.

    The problem is that some people (mainly on the left) do not like Walmart's anti-union/pro-business philosophy and will say/do anything.

    I'll take my 10% per year average dividend increase and run to the bank w/ the money. The rest of you can whine about Wal-mart's policies.

  • Report this Comment On October 18, 2013, at 11:52 AM, hodgepdg wrote:

    Some of the comments on here are hilarious. Why do people hate Walmart so much? The reason they are doing poorly in my opinion is not because they do not have a union or their products are bad. The people who work there do not give a crap same as Best Buy. There is absolutely nothing wrong with products they sell many are brand name. If you do not provide at least a little customer service people will go elsewhere because saving the money is not worth the hassle. The Walmart near me they do not rotate any of their food which in the grocery business is a basic necessity.

  • Report this Comment On October 18, 2013, at 11:57 AM, hodgepdg wrote:

    Adamdup so conservatives are for paying a dirt wage huh. That is utter nonsense. You should be paid what the market will bear and based on your skill level. It's funny people like you decry the system we have have but immigrants come here and are immediately successful by working hard because they do not make excuses for why they cannot succeed. American cry and whine about all the things they cannot do instead of concentrating on wha they can. The liberal policies seem to be working well. 5 years of very little growth and we get nothing but excuses.

  • Report this Comment On October 18, 2013, at 12:08 PM, sfaid wrote:

    I don't see much mention in comments about Amazon.

    They have basically reenacted the slave trade. We have one of their warehouses here in The Lehigh Valley. We see articles in the Newspaper where the warehouse is +110 degrees, the employees are taken out on stretchers to the hospital, and get a point for missing work.

    Every penny we save screws a working American while Big business profits.

    It will not be until we as working Americans stand together, and vote with our purchases, that we can reverse the corporate greed that gives executives millions a year while putting employees on food stamps for the rest of us to support.

    Then again, it may be too late since ACA is going to break the debt backbone of America.

    PS. I am in a well paying job with a decent company in Finance industry(Banking is another story). Just saying what I see. Not bitching about an employer.

  • Report this Comment On October 18, 2013, at 12:31 PM, peteymotley wrote:

    Seems like no one leaves the house. Walmart and Target have NEVER been in competition. All you have to do is go there and see that its a completely different group of people. Sam's Club and Costco? Never been in competition - median family income at Sam's Club? $45,000. Median family income at Costco? $95,000. That's two very different groups of people. Walmart is a junk store. Target and Costco have always been higher quality and have always had a much more honest business model. Wal-Mart buyers, more than likely, are finding that they can get target quality stuff online at Walmart prices.. The fact that everyone at Costco is happy and generally likes their job and is paid well also means that the shopping experience is much more pleasant. Shopping at Walmart is, well, a drag. They may have the best inventory systems on earth, but they are nimble and dynamic, and are not able to change fast enough to react to a population that is figuring out that they aren't really cheaper or better than anyone. They are in fact, worse.

  • Report this Comment On October 18, 2013, at 12:35 PM, Evermyrtle wrote:

    Wal Mart had a great thing going and because of it's power as one of the most powerful and largest business, but they bowed down to the government, and forgot it's people.

  • Report this Comment On October 18, 2013, at 1:28 PM, psych101 wrote:

    I am a regular Walmart shopper and probably spend $500 a month there, but, I'm looking to shop elsewhere. As long as management continues to deny the decline in customer service, in product distribution and display, and messy, chaotic stores they will continue to decline. Shelves are poorly stocked with large empty gaps and missing staple items. Associates are either not to be found, unfamiliar with the store, or grumpy. Wait lines at the registers are dismaying. They close registers when lines are five people deep instead of opening some of the empty 20 or so registers. Walmart has forgotten people go there for convenience and one-stop shopping.

  • Report this Comment On October 18, 2013, at 1:39 PM, edshaw4947927 wrote:

    WMT -- always a lively subject. I recently moved to a place where WM is about the only store in town. It has been an eye opener.

    _____________________________

    1) Seems to be returning to its low end business model. More than one recent purchase there were defective leading me to suspect known brands might be dumping and flawed designs might be branded and sold rather than written off.

    Either way, I shift to "buyer beware" mode when in Wal Mart, something new to me.

    2) Return policies are getting stricter, maybe as a consequence of number one. One recent return was denied for a very picky reason -- I had thrown the manual away before I realized product was flawed.

    ___________________

    These observations and the numbers cited seem to confirm WalMart might be struggling, as the numbers indicate. Low cost leader is a hard position to hold. I would ignore the political comments, but would take the basic values, such as how it treats employees, into consideration. Comparing WMT growth rate with Amazon growth rate doesn't show me much.

    For many of the reasons posted here, I'd say the future for WMT does not look very bright.

  • Report this Comment On October 18, 2013, at 1:44 PM, NJC1982 wrote:

    I would imagine it has more to do with the decline of the China advantage. Walmart has helped keep towns financially alive and give jobs to many, many people. The have been having dirty dealings in other countries and not doing their due diligence on understanding the culture, Mexico (The city of the Gods) and Germany respectively.

    Back to China. Their days are numbered. It takes weeks to get poorly made goods from China to The West Coast (closest coast and where it all goes). So it has to be shipped out from there. China's ability to horribly treat its workers, people and general crimes against humanity, it was only fitting to have such a self righteous money grubbing organization like the Olympics celebrate their atrocities. Now the people are forming unions and demanding better working conditions. Their money will only guard them until 2015 when the USA pulls business out.

  • Report this Comment On October 18, 2013, at 2:00 PM, ecostarr wrote:

    Though many "who cares about the employees" investors are willing to denigrate earlier comments about the work environment, from a business perspective their treatment of employees has broader implications.

    First, they go through employees more rapidly than companies like Costco that pay and treat their employees better, so they have much higher training costs. Second, their stores are often insufficiently staffed, which means product is not on the shelves for people to buy or you have to wait an extra long time in line to purchase your goods. Worse, when you finally get to the front of the line, there is no guarantee their equipment will work, b/c they use their tech till it falls apart. If low cost and convenience is your business model, this strategy violates both. WM is entering a death spiral, where lower margins are leading to cutting more staff hours, leading to lower margins etc. and customers are starting to get fed up with WM and go elsewhere.

    As one commentor noted, why subject yourself to such a depressing experience? If you can't find what you want, you're going to have to go to another store anyway, so why waste the trip and endure the hassle. I avoid WM like the plague for precisely these reasons.

    There was a time, when Wal-mart was a hand over fist investment. Not any more.

  • Report this Comment On October 18, 2013, at 2:04 PM, tomjtoon wrote:

    To Mathman6577

    That 10% dividend increase won't be around long when the WMT foundation is crumbling.

  • Report this Comment On October 18, 2013, at 2:05 PM, psrahko wrote:

    You emphasize business models where the workers are positive and happy. Everybody I know that works for them hates the management, hates the work rules, is treated poorly. Turnover is high and some stores cannot hire enough workers because the reputation in the small town is so bad. I never have and never will invest in WalMart.

  • Report this Comment On October 18, 2013, at 3:18 PM, canneryrogue wrote:

    I have owned Walmart since 2006. By purchasing at the right prices, I have earned 9.76% annually compounded (and this includes the market crash). Considering its rock solid balance sheet, I am happy with the stock's performance.

    My local Walmart is extremely clean, well laid out and efficient. This is the god honest truth.

    I think the trends the author points out are real but trees don't grow to heaven. Walmart is so much bigger than Target and Costco. Will Amazon eventually sell us everything we consume, including groceries? I tend to think no, but who knows what the future holds.

    I agree with someone else's comment that the Motley Fool had Walmart as a core holding and then dropped it like a hot potato. I like their newsletter for ideas (and it is cheap) but I don't think they have magical stock picking abilities

  • Report this Comment On October 18, 2013, at 4:10 PM, suejb wrote:

    The trouble with those looking for jobs want to make $15 or more on entry level jobs. When you consider what employers pay to the government on your FICA, social security and medicare taxes and have to MEET your social security deduction too, employers are paying alot of taxes on each and every person that works there. With the unemployment being so high, any job with a pay check should be a blessing. It may have been 44 years ago when I started working but I was only making $1.70 an hour. I worked at Walgreens in the photo studio. We could get profit sharing and a savings plan when we turned 25 and I was only 18 at the time. That meant I had to work 7 years before I could start their programs. Eventually they changed to working 1 year. I worked their for 19 years. AND you others who commented about unfair treatment by managers, you should have worked where I did. And that was 30+ years ago and in order to have an easier life there, you had to kiss a lot of butt. If you want a job then and now, it's not easy. And just because you work at Wal-Mart doesn't mean that college educated people don't have to kiss butt at their higher paying jobs.

  • Report this Comment On October 18, 2013, at 5:19 PM, dormouse1 wrote:

    As long as the progressives keep adding people to the food stamp program, printing billions of $$ that inflate away retirement savings, legalize 12-16 million illegals and dump another 30 million people into the public health care system, Wally World will be just fine. The progressives are making certain that there will be plenty of people to spend your tax $$ at WMT. Sometimes slow & steady does win a race.

  • Report this Comment On October 18, 2013, at 6:03 PM, Wahoo238 wrote:

    The damage done by Wal -Mart is something that will be hard to repair. They employed people at less than living wages and spent Millions on keeping their corporation union free. The employees are the victims along with the small companies that have supplied them. When all else failed they purchased their goods from China. Go ahead check the lead content of your table lamp you purchased from WM.

    To the future unemployed of Wall Mart too bad you should have studied harder in HS and thought about what the future holds for you. I had an electrical shop teacher tell the class if you don't make something of yourself you'll be stamping the tops of soup cans 2/for .69 for the remainder of your life. It made an impression

  • Report this Comment On October 18, 2013, at 6:25 PM, SgtRockOrg01 wrote:

    Whole Heartingly agree with all above comments especially Timotely.I have been saying the same story over and over for the last 3-4yrs. Here in B-town Ca, the Sams club has no chance to recover compared to Costco. The customer is put into the position of getting merchandise (milk,eggs etc from freezer area) and only have limited lines open during rush hours and weekends (yes I have adressed this to different levels responceable) which fall on dead ears. Now we do our own check out(s) encluding Super WalMart next door,but don;t see any fair prices. We all could gone with the "Truth" that WalMart/Sams club tells us (Lies) that we see only the real truth. They think that they own us all...WAKE UP!!!...Surprise,Surprise....Customer is more powerfull...We put you there,and we can take it away. Pen is Mighter than the sword...

  • Report this Comment On October 18, 2013, at 8:05 PM, WAP6550 wrote:

    Wake Up!! All these comments are so out of line.

  • Report this Comment On October 18, 2013, at 8:16 PM, jthare76 wrote:

    I am sorry to read about bad experiences in locations where Walmart services communities with a quality experience and lower produce prices.

    If I find myself at the Union inflated food suppliers, I find my pocket emptying much faster with the same quality products I chose to purchase elsewhere...

    My Other alternative here in the Midwest is ALDIS.

    Our local Walmart has improved the lighting over the Fruits and Vegetable areas, much like Dominic's had done with their Fresh approach. Possible this is a pilot site and will be rolled out nationally depending on consumer response.

  • Report this Comment On October 18, 2013, at 9:22 PM, boolanger wrote:

    Wal-Mart is often praised by the investment community for its ability to squeeze suppliers to offer the lowest prices and having a great distribution system. These analysts clearly have not entered a single store. The fact is Wal-Mart is a terrible retailer. Examples: The parking lots are usually filled with empty carts which have damaged wheels - Offer no hand baskets for smaller purchases - Understaffed with poorly trained employees - Poorly stocked items (they also restock all at once blocking all the aisles, a curious event) - Prices often hard to find. What I find most unexplainable is their pricing of tobacco and alcohol. I asked the manager of a local store why their cigarette prices were higher then local merchants and her response was "We don't price check alcohol or tobacco". Really? Approximately 23% of adults smoke in the US but that rises to about 33% for lower income people. Surely Wal-Mart could and should be the low price leader in cigarettes and alcohol sales but they choose to ignore these major markets. As for on-line sales with pick-up at the local store, this is an exercise in frustration and simply undoable! I could go on but the fact of the matter is Wal-Mart will go the way of Kmart if they don't make serious changes soon. I wouldn't consider buying the stock as it is operated today.

  • Report this Comment On October 19, 2013, at 1:48 AM, Vigilant15 wrote:

    Travis, Walmart's troubles don't have anything to do with the economy, Amazon competition, troubles of low income shoppers (used to have many middle/high income convenience shoppers ), certainly not made-in-China merchandise, or failing to pay unskilled labor $40K per year. Rather, Walmart is the most incredibly incompetently managed retail organization you will find anywhere. It is simply mind boggling. The current management simply doesn't know how to run the store (or perhaps any store). They are slowly killing Walmart--the slow death has been underway since 2005. The board should find some of those Sam Walton-culture executives that the current management fired some years ago, leaving no one who knows what made Sam's Walmart special. The company has probably passed the point of no return now--having driven away thousands of HABITUAL shoppers with pocketbooks that permitted them to shop elsewhere when the mismanagement accelerated to an unbearable level. They're at Target, Publix, Kroger, Home Depot, Lowes, Kohls, etc--literally driven to the competition by the chaos at Walmart.

    It may be too late for the Walmart board to seek new executives, but you have to wonder why they don't at least give it a try. Must be that they don't pay anonymous visits to stores to see the chaos for themselves and thus sadly believe all those excuses about the economy.

  • Report this Comment On October 19, 2013, at 9:47 AM, TMFMurph wrote:

    Hi Travis!

    I would love to see the same growth chart expressed in absolute dollars versus percentages.

    Thanks!

    Murph

  • Report this Comment On October 20, 2013, at 3:39 AM, depsee wrote:

    Its called GREED,

  • Report this Comment On October 20, 2013, at 11:08 AM, 123spot wrote:

    Travis, thanks for the article. I am a long term holder of WMT, shop there regularly, and enjoy its contributions to my region in Arkansas from employment to art to support for the poor.

    I don't understand why you broke out Sam's numbers from WMT's. WMT earnings include Sam's earnings. Therefore, WMT should be 21.8 % in your last column! a significant difference.

    Please explain to me if I am wrong.

    Thank you. Spot

  • Report this Comment On October 20, 2013, at 1:04 PM, catkins2010 wrote:

    Having spent 22 yrs of my life with Wal-mart, if you had cut me, I would had bled Wal-mart Blue, Life in Wal-mart was good, Plenty of associates, time to teach and train, CBWA was my life in the store, being a Merchant was fun--buying and selling mdse, we had markdown money to clean up on old mdse, Now after being gone for 3yrs, (now working for a Supplier) I see the poor conditions of the stores on a daily basis, 3-5 yrs ago outs in Grocery were expected to be 25 or less daily, now they run in the 800 range daily, inventories in the back room are at an all time high, they are more concerned about items being bin'd in the backroom, than getting it to the sales floor and filling the outs, No one can make a decision at store level, being a Merchant (how the company got to be where it is today) is out the window, markdown money is not there to clean up old mdse, hours in the stores have been slashed to pay for excessive inventory shortages, stores are more cluttered and filthly than ever, Commercials touting their Produce are on air all the time, but the product is still as bad as ever, So, to put it all in perspective, my wife and I went shopping a week ago sunday, (Wal-mart instead of our usual Kroger), not a single bag of fire ant killer on the shelf, (even tho it had rained for 3 days,oh--they cant be a Merchant any longer), could not get a basic 20x20 Air Filter, Grocery shelfs were blown out, and the Meat counter was filthy and could not get the Ribs needed for a Recipe (went to Kroger and got those!!), all this at 12:30 on a Sunday, Solution-----Staff the stores, lower the inventory, get in stock, clean up the stores, unclutter the stores, and get Mgmt out of the offices and onto the sales floor, it's not rocket science!!!!

  • Report this Comment On October 20, 2013, at 5:35 PM, shulkman wrote:

    Ok, Walmart... I couldn't resist the urge to speak up. I worked there from Feb '11 to Feb '12. The only reason I worked there was I went directly to the Pharmacy and was paid a good wage. In fact, they must figure in those specialist wages when coming up with their "average" wages for stories. Heck, I wouldn't be surprised if they included Pharmacist wages as well. I'm sure a couple people making a 3K a week really helps bring the averages up. I didn't socialize much in the Pharmacy, and only talked to a couple of floor people occasionally, but every floor person made minimum wage to start, and I'm willing to bet they still make minimum wage. Luckily for these workers, Washington State's minimum wage is going up faster than regular raises ever would normally. Now I realize that a floor person isn't doing anything too specialized, and therefore doesn't demand a premium in most people's eyes. But I will say this about them... They put up with Wal-Mart shoppers. The patience they show is on par with the Pope. You could be paid Pharmacist wages and it would still be hard because money can't scrub those memories from your mind. The images themselves are one thing... but interacting with them can be a scary proposition. I wouldn't have lasted a day if I was just a floor person. They were treated quite poorly, by customers and supervisors. At least in the Pharmacy, you had a portion of people act civil towards you, because upsetting you might cause you to pay attention to their previous refill date on their narcotics. We were told to fill it if the computer doesn't block it, and the computer was awfully loose in it's interpretation of "legal to refill"... Morally, it wasn't even close to time, not without a call to the Doctor. But, the dollar is king, so I obeyed as long as their scripts all came from a single doctor. When people got snippy and complained about how long they waited (which wasn't long at all if I was working) then I would apologize, but I'd kindly remind them that while I will get things done as quickly as possible, I will not sacrifice their safety in favor of a little speed. (Not that I could go faster. I filled 3500 scripts per month, the next fastest person did 1000, and that was impressive for them.) It wasn't about their knowledge of medicine, it was about their lack of ability to focus that cost them. As I said. I didn't talk, I didn't chat. I powerwalked to get drugs off shelves, and I didn't screw up. Unfortunately, the Chatty Cathy(s) never stopped talking and therefore were much slower and made mistakes all the time. I caught those mistakes when I had to go to a register and clear out the backed up line of customers. When a customer came up, I didn't stroke their ego or inquire about their granddaughter. I got their name, birthdate, meds and checked the bottles inside and out as I scanned them to make sure the right drug, right quantity, and right name were on each. I got them rung out, and out the door. Sure, sometimes someone would complain that I didn't smile or chat them up. (I said hello and thank you. I wasn't a total jerk.) but when you've been in line for 10 minutes and there's 5 more people to go, I think everyone is happier if I get them all on their way. After fixing the messed up prescriptions that is... You'd never go there again if you knew how many times I caught a co-workers screw up. (I stopped filling my meds there, even while I still worked there.) After 11 months, they fired my boss and left us without any real management. Some front end Asst. Manager would come back and try to exercise authority for a few minutes. Then we'd get tired of her and told her she needed to leave, per state law, since she was not licensed by the Board of Pharmacy. I started looking for a new job as soon as the boss disappeared. I got it and quit 2 days short of my 1 year anniversary.

    It wasn't the worst job I've had, it wasn't the worst treatment I've received. I couldn't complain about the pay at all, but then again, it took my schooling plus 12 years experience to finally get a decent starting wage. It wasn't horrible until the boss was gone and non-pharmacy manager's came to you with orders that were disguised as suggestions. The problem was our procedures are guided by pharmacy law and our own years of experience. Without the boss to keep Store Management away, almost everyone eventually left before they were able to get a new Pharmacy Manager in. Since then, I've only gone back into that store a few times, for items that I can't find elsewhere. I pretty much shop for food at Albertson's, non-food items at Amazon, and Costco is the electronics/specials place.

  • Report this Comment On October 21, 2013, at 10:02 PM, ceroger wrote:

    I have worked for walmart 7 years now. It started part time and temporary. I now work as a higher on the ladder supervisor. While I disagree with a lot of corporate decisions the individual stores can be great! Im a single mother that supports 3 children I was able to buy a home, a car, 401k and saving with zero government assistance. I work my ass of and am generally treated with respect, you get the occasional douch bag manager. 2 years ago i herniated 2 discs in my back work was slow and painful but my store manager allowed everything I needed. I think during the entire 2 year ordeal of pain and dr appts I missed at most 2 days of unpaid work. I couldn't have survived independently without that. If walmart went out of business I would be completly screwed. I get many benifts and more then decent pay. granted starting wage isnt good but after a short time there is opportunity to make a respectable living. Just wanted to share Walmart isnt a big bad monster. and I hear positives from customers several times a day and as a total store and neighboring stores were involved a lot with the community. And fellow associate in need I have seen great things happen within a store for a needy coworker.

  • Report this Comment On October 22, 2013, at 1:31 PM, choppaz4life wrote:

    Work at walmart and live on food stamps. That's how they prefer their employees to live. Part-time employment with varied hours requiring all part time employees to be available at all times, making another part-time job impossible. Work two part time jobs and you will be fired because you are not at their beckoned call. So my question is how much are we willing to pay in taxes in order to support the families of walmart's employees with food stamps? I say there should be a law that requires a business that drains the system to pay it back. Every cent that is paid out in food stamps to wmt employees should be paid back by the company from their ever increasing profits. Our tax money supports wmt profits, talk about corporate welfare.

  • Report this Comment On October 22, 2013, at 2:47 PM, adamjewl wrote:

    Walmart contribute almost 73% of the total revenue generated by the industry. Walmart have been loosing market share to Costco. Walmart has low beta of 0.36. I have come across this information and much from: http://goo.gl/UMXU8W

  • Report this Comment On October 22, 2013, at 4:25 PM, OzarkRidgeRunner wrote:

    I do not know about working at Walmart. However I do recall shopping before their retail model. You had to go to multiple stores to find what you needed and not always successful. You had to wait for the store to order and it took weeks. We shopped mainly from catalogs from Sears or Penney and sent our order by mail. It took weeks to

    receive and if they were out of stock possibly months. Prices were not competitive. If you were lucky there were catalog stores where you could order. In those days we spent a great deal of time shopping usually two or three Saturdays a month. It was not fun and Walmart"s model made shopping in one place easier and less time consuming. The way we did it then would drive most people nuts today.

  • Report this Comment On October 22, 2013, at 8:14 PM, volcan357 wrote:

    I haven't shopped in Walmart's for years because there isn't one where I live but I used to shop there when I lived in the USA. It was very popular in the 1990's. The retail business is difficult and everything is changing so it is hard to remain number one forever. There is a Costco here in Panama and it is quite popular with many people. There is no other store quite like it in the whole country so they don't have much competition. I imagine with time Walmart's will lose their number one position. Just like Amazon has done people think of new ways to do business. E-bay is also very popular and it gives small sellers a chance to get their foot in the door. I buy stuff from E-bay and have it shipped to Panama through a private mail-forwarding service based in Miami. I do the same thing with Amazon. It is a little more expensive but it works okay. Another amazing thing that is happening through both E-bay and Amazon is that some merchandise is shipped to you directly from China. It arrives surprisingly fast. The world is changing.

  • Report this Comment On October 23, 2013, at 1:31 AM, Saintramus wrote:

    I wonder what would happen if international sales were added to the comparisons? My thesis in buying WMT was that domestic sales would probably stagnate but there was a potential for international growth. Travis' article is a drumbeat of U.S., U.S., U.S.

  • Report this Comment On October 24, 2013, at 2:32 PM, RayAm wrote:

    Several observations re: shopping at WalMart. Not too long ago, I was out late with my wife and she needed to buy some fabric at WalMart. While she was busy, I walked the store and noticed about 10 employees walking by 2's from the back room onto the floor. They looked like Zombes. The look on their faces was depressing. My heart literally sunk as I watched these poor workers start their shift with a look of " is this the best I can do " written all over them. Not long after that, I had ordered something online for a pickup at the store. At the service desk, one employee went back to retrieve my item so I made small talk with the other at the counter. I made a casual statement along the lines: "at least they don't make you work off the clock anymore" to which she looked at me and "rolled her eyes." She said "don't repeat this, but that still goes on."

    I also have a friend that is retired and his wife works at WalMart part-time. She checks for register receipts at the exit for larger ticketed items. This particular store (brand new superstore)gets quite a few shoppers that are "minorities." My friend reports that shop lifting is off the charts. He told me recently that practically every night, a "shopper" walks out the door with a big ticket item that simply refuses to show his wife the receipt. The policy of WalMat? Don't challenge them and let them go ! Why? Because they don't want the hassle and potential bad publicity of an "incident" with a minority "shopper." Guess who picks up the tab for this type of activity?

    Although I am just a casual Walmart shopper, I have noticed in the several stores I have visited in the last year or so that the cleanliness of these stores has definately gone down. I have also noticied large, vacant holes on many shelves ... which reminded me of K-Mart prior to its collapse. The shopping experience at WalMart has taken a very perceptively slide downwards, where employees seem to have an attitude that they are working at the lowest rung of the ladder, and typically display that attitude on their sleeve.

    I would not be surprised at all if in the future this company continues to lose market share. Along that same line, Sam's Club seems to be following the same downward path.

Add your comment.

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: 2676972, ~/Articles/ArticleHandler.aspx, 9/17/2014 2:01:13 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...


Advertisement