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Why An Investment In Walmart Is Dead Money

August 9, 2010 By 12 Comments

Back to school shopping season is almost upon us. Parents will be headed out to discount stores to save money on school supplies, backpacks, clothing, and shoes. College students will be heading back to college soon and buying books, electronics and dorm essentials. Despite the uncertain economy, parents plan on spending more money this year than in 2009. According to American Express, parents with two kids spend an average of $550 on back to school shopping. So, what retailers stand to benefit the most from the coming spending spree?

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Costco’s Management Has The Right Touch

April 20, 2010 By 2 Comments

With so much negative news about greedy CEO’s bilking companies, I want to take a look at some of the best CEO’s in business. For the next few days I will highlight a successful CEO that does things the right way. Today it’s Jim Sinegal of Costco.

Costco (COST) CEO Jim Sinegal takes home just $350,000 in base salary. His total compensation over the past 6 years including stock options and benefits has averaged $4.88 million dollars. That’s pretty low for the head of a $26 billion dollar company. He is a down to earth CEO who happily meets with customers and even answers his own phone. Sinegal’s philosophy is to focus on making employees happy. He believes that a happy employee is a productive employee.

Sinegal is quoted in US News & World Report as saying, ”When you hire good people, and you provide good jobs and good wages and a career, good things are going to happen,” Sinegal says. “We try to give a message of quality in everything that we do, and we think that that starts with the people. It doesn’t do much good to have a quality image, whether it’s with the facility or whether it’s with the merchandise, if you don’t have real quality people taking care of your customers.” Sinegal is not just focused on hitting short term quarterly numbers but is trying to make Costco a better business over the long run.

It’s easy to see why Costco is so successful. Costco is generous with employees and pays a much higher wage than Walmart. Employee turnover is much lower at Costco than Walmart. Employee turnover is a remarkably low 12% at Costco. The average Costco salary is $19 per hour and 86% of workers have health benefits. Costco does not have to spend hundreds of millions in advertising. The retailer relies on word of mouth. Employees advertise for the company. In this age of greed and corruption, it’s reassuring to see that some companies are still doing things the right way.

I do own Costco shares.

 

Photo by: coolmikeol

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4 Stocks for the Long Haul

January 16, 2009 By Leave a Comment

I own stock in each of these companies and have never sold a share. I look to add to my positions when I think the prices are cheap. This is by no means a recommendation for you to buy these stocks. I just think that the information may be useful.

1. BP – This is my favorite oil and natural gas company. I love the growth prospects for the company and the dividend is great. BP has consistently increased the dividend for as long as I have owned the stock. I even buy my gas from BP because it makes me feel like I am paying myself.

2. Nike – The swoosh dominates the athletic apparel market. Nike continues to sell athletic gear both domestically and globally while leaving its competitors in the dust. Nike hasn’t been cheap enough for me to add shares in quite some time. The recent drop in price is giving me my best buying opportunity since 2006.

3. Costco – I love the Costco business model and the growth potential. Costco offers discounted goods and services while paying employees fair wages. I think that Costco could potentially open hundreds of new stores domestically over the next decade. I must like Costco a lot considering that I have held it through the beating that retail has taken.

4. Burlington Northern – I must admit that I only found Burlington Northern because Buffett was buying the stock. Even though the stock is near its 52 week low and transports are declining; I am looking to add shares. The railroad business has been the most cost efficient way to transport basic materials for years and should continue to be so.

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Kmart Can’t Compete

January 5, 2009 By 6 Comments

I went shopping at Kmart for the first time in a long time. I remember going to Kmart when I was younger but I have only been to Kmart one time in the last four years. I am a bigger fan of Costco and prefer to shop there. I actually bought stock in Costco a few years ago because I like the business model, management team and employee friendly policies. So, why did I stop at Kmart? It was close to my house and the parking lot was empty so I figured I could get in and out quickly. I had also heard about the remodeled stores and was curious to see how different Kmart looked from my last visit.

Kmart looked about the same from the last time that I had been in the store. The interior was a little cleaner but the displays were still poorly organized. The store was dimly lit and there was a cold impersonal feel to it. Kmart is just not as appealing as a Target store. The customer service left a lot to be desired. The store was understaffed and the lines were very long. It took about 10 minutes to check out with less than 50 people in the whole store. The one good thing about Kmart are the prices. The prices at Kmart have gotten much more competitive with Walmart.

For years Kmart has struggled to compete against discount retailers Walmart, Costco and Target. It seems that Kmart can’t find the right niche to compete with the larger retailers. Walmart is the low cost leader in the industry and offers the cheapest prices. Costco prides itself on offering higher quality products and the best customer service. Target lands somewhere in between Costco and Walmart with its “cheap chic” strategy. Kmart’s place in retail is still undefined.

Does Kmart want to be the cheapest of the discount retailers? If so, Kmart will have to lower prices even cheaper then Walmart to attract customers. Or does Kmart want to compete against Target and Costco? If so, then Kmart will have to do a lot more than just slap some paint on the walls. Kmart must commit to better customer service and a wholesale remodeling.

It seems to me that Kmart has undertaken small steps to become more relevant in the retail industry. But without a major restructuring of its business model; Kmart’s days could be numbered.

Photo by XISMZERO

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Top Stocks for 2009

December 24, 2008 By 1 Comment

Here are three interesting articles on the top stock picks for 2009. Use these lists with caution as stock picking websites can be just as wrong as they are right.

Smart Money Top Stocks for 2009 - Stocks that I like on this list are Duke Energy(DUK), Microsoft(MSFT), Johnson & Johnson(JNJ), General Electric(GE). None of these stocks are high growers but are best of breed dividend paying stocks.

Motley Fool Best Stocks for 2009 - Exxon Mobil(XOM) and Costco(COST) are the stocks that I like on this list.

Forbes 17 stocks for 2009 - Not a fan of any of these companies one way or another but the column is worth reading.

I currently own shares of GE, Costco and Microsoft.

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