I have been saying for some time now that an investment in Walmart is dead money. Shares of Walmart are down nearly 4% today as the stock has dropped to $53 per share. The company released earnings today and the results were a mixed bag. The good news is that Walmart had total revenues of $5.02 billion. Earnings per share came in at $1.41 a share. Both numbers are an improvement over last year’s Q4 numbers. Earnings rose 6.3 percent to $15.4 billion dollars. So, what’s the problem with Walmart?
3 Stocks That Have Been Cheap For A Decade
August 26, 2010 By 3 Comments
I have the learned the hard way that just because a stock is cheap does not mean it is a good investment. It can be tough sometimes to distinguish between a value play and a value trap. Value plays are stocks that are trading below their true value and will eventually reach this value. Value traps meanwhile are companies that appear to be trading cheaply but are trading at their current level for good reasons.
Here are 3 stocks that have been cheap for a long long time.
A Small Cap Retail Stock With Tremendous Growth Potential
August 10, 2010 By Leave a Comment
What company sells the most consumer electronics in the United States? The answer is Best Buy (BBY). Best Buy is the largest electronics retailer in the United States. The company’s only major competitor is Walmart (WMT), which has been making a bigger push into the consumer electronics industry. Both companies are fighting for the market share left by the Circuit City bankruptcy. Smaller players like Radioshack (RSH) are fighting to remain relevant over the long term. There is another small cap company that has the potential to be a serious competitor over the long term.
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?
More Layoffs
February 10, 2009 By Leave a Comment
You know that the economy is getting bad when Wal-Mart is laying off employees. The nation’s largest retailer announced that it will be laying off between 700 and 800 employees at its Bentonville, Arkansas headquarters. The cuts will be at both the Wal-Mart and Sam’s Club headquarters. Most of the jobs are in the apparel, health and real estate departments. Wal-Mart is also scaling back on the number of new store openings this year. Wal-Mart may open 40 fewer stores as compared to last year’s openings.
General Motors announced that the company will be cutting 10,000 additional jobs this year. Most of these positions are white collar jobs. These cuts are probably only the beginning at GM until the company finds a way to become profitable. I have said before that I expect that 1 of the Big 3 will not survive to see 2010. This could be through a merger, acquisition target or through bankruptcy. If GM and Ford are struggling this badly, I just don’t see how Chrysler will survive. The alliance with Fiat is not enough to save them. Chrysler has the weakest cash position and the worst sales numbers of the Big 3.
A Tale of Two Retailers
January 9, 2009 By Leave a Comment
Walmart was not immune to the economic downturn as so many analysts had predicted. Walmart saw its same store sales increase by 1.7% last month. Good news, right? You would think so but Walmart disappointed by falling short of analyst expectations of a 2.8% increase in comps. The nation’s largest retailer saw its shares decline $4.16 yesterday to close at $51.38. Walmart(WMT) cut its earnings outlook by 10% for 2009 citing lower sales growth and tighter operating margins.
Conversely, Sears saw their same store sales decline 7.3%. Sounds bad, right? Wrong again. Sears announced a profit higher than analyst predictions. Sears Holdings shares rose $9.43 to close at $49.98 per share. While the numbers are not good at Sears Holdings, Sears and Kmart both seemed to benefit from layaway programs. As stated in my post on November 28th, I thought that layaway would help entice credit weary borrowers to purchase items that they otherwise would not have purchased this year.
The name of the game is expectations. I find it interesting that Walmart’s stock slumped even through sales increased and Sears stock increased despite a sales decline. I suppose the lesson to be learned is that it’s better to have Wall Street underestimate your earnings potential than to overestimate.
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
