Full Shelves, Empty Aisles

Woes mount for Wal-Mart [Toronto Star]

It was business as usual for Wal-Mart last Tuesday for a superstore opening in Peru, Ill., which is to say the mood was of righteous self-assuredness. A marching band played “The Star-Spangled Banner,” store manager Mitch Lippert whipped up his troops ("Who’s fired up!"), and Rev. Oscar Shepherd of Christ Family Foursquare Church sought the Almighty’s blessing “as we interact with each other in the marketplace.”

You’d never know Wal-Mart Stores Inc. was in a heap of trouble.

The company’s growth rate has slowed to a crawl, overtaken by rivals once thought to be no match for the “beast of Bentonville.” Average annual profit growth lags that of Target Corp., Costco Wholesale Corp. and other competitors. Wal-Mart’s repeated efforts to push upscale merchandise have ended in tears. Expansion at home is still thwarted by hundreds of U.S. communities; and several forays abroad are struggling or have been scrapped. The stock price is down 32 per cent since the turn of the century, when CEO Lee Scott took the reins, while the Morgan Stanley retail index has soared 180 per cent.

If Wal-Mart wasn’t 40-per-cent controlled by the heirs of founder Sam Walton, an “activist investor” like Carl Icahn or Kirk Kerkorian would be calling for Scott’s head and the spin-off of Sam’s Club, an also-ran to Costco.

As it is, many on Wall Street are convinced Scott will be out of a job come next year if he can’t show some progress over the next six months in breathing new life into the world’s largest retailer. He isn’t given much hope of doing so. “[This] is the end of the age of Wal-Mart,” Richard Hastings of U.S. retail ratings agency Bernard Sands told Business Week in April. “The glory days are over.”

At 45, Wal-Mart is showing its age. With sales of $345 billion (all figures U.S.) last year at 6,779 stores in 13 countries employing a total of 1.9 million people, Wal-Mart still has the clout to dictate pricing and package design to giant suppliers like Procter & Gamble, Campbell Soup Co. and Dell Inc., which rely on Wal-Mart’s 3,443 U.S. stores and thousands more abroad as one of their biggest, if not their largest, distribution channels.

But last year, Wal-Mart eked out same-store sales growth, at outlets open at least a year, of just 1.9 per cent, a mighty comedown from the routine double-digit increases of the 1990s. Scott has responded with top-level management shuffles, an overdue store-remodeling campaign, and a renewed determination to crack foreign markets. Yet Scott has not been able to budge the needle.

Last week, Wal-Mart reported anemic same-store sales growth of 1.9 per cent for July, the kick-off of the important back-to-school season, trailing the industry average of 2.6 per cent. Wal-Mart blames financial pressure on shoppers from high fuel prices and a weak housing market. Yet those factors didn’t hobble Target, which posted a same-store sales gain of 6.1 per cent, Costco (up 7 per cent) or J.C. Penney Co. (up 10.8 per cent).

Probably more ink has been spilled on Wal-Mart’s phenomenal success than any firm save Microsoft Corp. But the firm turns out to be a one-trick pony. It’s a discounter that thrives on selling high volumes of low-margin goods at knock-down prices in small-town monopoly or near-monopoly markets.

As it has tried to move into higher-margin apparel and other goods, and expand into large urban markets in the U.S. Northeast, upper Midwest and the West Coast, and into Europe and Asia, far from its U.S. flyover territory origins, Wal-Mart has run into every kind of trouble imaginable.

Wal-Mart’s vaunted logistics prowess, the advantage for which it is most feared, is no longer able to keep the fastest-moving inventory reliably in stock. Discriminating shoppers in its newest, urban markets are accustomed to higher standards of quality, selection and customer service than Wal-Mart has ever had to offer. And the firm, as it tries to retain its profitability of old, has shown a curious response to that challenge, recently capping wage increases for clerks who already are underpaid, scarce and lacking in product knowledge.

Many Wal-Mart outlets remain an aesthetic dead zone. The company’s belated store-remodeling efforts have been half-hearted, even though an alarming internal Wal-Mart survey in late 2005 found that one-quarter of the company’s U.S. stores fall short of minimal standards in everything from adequate lighting, prompt check-out time and even cleanliness – standards few Wal-Mart observers would describe as especially high in the first place.

Foreign expansion has borne scarcely more encouraging news than the home front. Fifteen years after first venturing outside the United States, Wal-Mart garners only 22 per cent of its total sales abroad, and a far smaller percentage of profits. And most of that business comes from Canada and Mexico.

Those few Wall Street analysts who anticipate a Wal-Mart renaissance pin their hopes on international growth. But Wal-Mart last year quit Germany and South Korea, and has made little headway in other giant markets including China and India. In Japan, the company has lost money five years running.

At home, meanwhile, Wal-Mart is caught in a squeeze between “cheap-chic” merchants like Target, H&M and Zara, whose higher-income clientele it has not been able to lure; and the proliferation of “dollar stores” and convenience marts nibbling away at its core customer base of 42 million lower-income shoppers.

Wal-Mart has trouble holding on to executives initially touted as architects of a coming transformation. Senior marketing executive Julie Roehm was fired in December, accused by Wal-Mart of an improper romantic involvement with a subordinate, taking gifts from suppliers and misusing her expense account. Roehm disputes the allegations, claims her famously conservative employer resisted her fashion-forward sensibilities, and has accused Scott and other top Wal-Mart executives of indulging in the same practices of which the company accuses her.

And last month, Claire Watts, head of apparel merchandising, abruptly quit after Wal-Mart appeared to be scaling back its upscale-product strategy.

A more fundamental problem is Wal-Mart’s paucity of high-level merchants. Scott, 58, a Wal-Mart lifer, came up through the company’s logistics and trucking ranks. (Wal-Mart owns the U.S.’s second-largest private trucking fleet.) And Eduardo Castro-Wright, who has so far failed to impress in his mandate to fix the core U.S. operations he has headed since 2005, is a veteran of tobacco giant RJR-Nabisco and defence contractor Honeywell International Inc.

Wal-Mart seems to be its own worst enemy in public relations. Already the target of class-action lawsuits from employees claiming to have been locked inside stores after closing time to perform extra work without pay, and the biggest sexual discrimination class-action suit in U.S. history, Wal-Mart’s Threat Research and Assessment Group – set up to curb “shrinkage,” or employee theft, and pro-union sentiments among employees – was found to have spied on company critics including consultants, irate shareholders, financial reporters and even members of the company’s own board.

In May, Human Rights Watch, better known for raising alarms about civil-rights abuses in repressive regimes, accused Wal-Mart of violating labour laws.

In fairness, Wal-Mart is confronted with the daunting law of large numbers. It has to grow by $35 billion this year just to post a respectable growth rate of 10 per cent, which means finding new revenues equal to the total sales of Walt Disney Co. or Intel Corp.

The keys to a Wal-Mart revival include adjusting to local customs abroad – Germans were put off by its overly familiar greeters – and wringing more profits from its core operations at home.

It’s actually good news that Wal-Mart’s 800 best-run stores boast sales growth 10 times higher than its 800 worst-run outlets – a shocking revelation the firm made a year and a half ago. And it’s good news that Wal-Mart has bungled in so many different ways this decade – in rushing into upscale merchandising without realizing you don’t roll out an ad campaign until the advertised goods are in the stores; and that failing to rehabilitate shabby stores is an expensive bargain. Good news, because those are fixable issues that offer significant growth prospects.

But the long-term dilemma for Wal-Mart remains that its reputational damage runs so deep that any reclamation project will come too late. In a damning 2006 report for Wal-Mart by the firm’s former ad agency, based on interviews with scores of customers, rival merchants with superior product selection and customer service were identified as the preferred choice over Wal-Mart in dozens of categories, including apparel, electronics, prescriptions, home décor and even groceries, where Wal-Mart is the U.S. market leader. “Shop there if you must” seems to be Wal-Mart’s unofficial tag line.

If Wal-Mart is not to go the way of General Motors Corp., Sears, Roebuck or Xerox Corp., whose long success bred an arrogance that blinded them to changes in the market and doomed them to fail at reinventing themselves, the company will need a top-to-bottom cultural makeover that rejects shoddy stores, outlets understaffed by poorly paid employees with little product knowledge, and a consistent drive to somehow upgrade its merchandise without alienating its base of low-income consumers.

It’s a tall order that may require divine intervention. It might help if Rev. Shepherd remembers the beleaguered Wal-Mart CEO in his prayers.

Posted by Alex Goldschmidt on Monday, August 13, 2007

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COMMENTS

(Picture above)
The shelves are full but not the aisles at Wal-Mart Superstore in Ancaster,

R E M E M B E R
J O N Q U I E R E
Q U E B E C
Home of Walmart Worker Abuse
We will never forget what you did Walmart.

R E M E M B E R
J A C K S O N V I L L E
T E X A S
Home of Walmart Worker Abuse

Alex in Ontario, Canada
Monday, August 13 at 02:30 PM

I’m glad to see that Wal-Mart is seemingly “over the hill.”

Hope to see more such stories.

Rob in Surfside Beach, SC
Monday, August 13 at 05:03 PM

“Survey: Wal-Mart poised to report biggest quarterly profit in decade

Posted by the Asbury Park Press on 08/13/07

Wal-Mart Stores Inc., the world’s largest retailer, may report the biggest quarterly profit gain in at least 10 years, helped by higher sales of electronics products and comparison with a year-earlier period that included a charge to pull out of Germany.

Net income for the second quarter probably rose 52 percent to $3.17 billion, or 77 cents a share, according to the average estimate of 18 analysts surveyed by Bloomberg.

A year earlier, profit fell for the first time in a decade on costs to sell its 85 stores in Germany. Sales in the three months through Aug. 3 rose 9.8 percent to $92.8 billion, the survey showed.

Wal-Mart added Dell Inc. computers and sold more flat- panel televisions during the quarter. The company named new executives to oversee clothing after sales of higher-priced apparel and home goods faltered.

Last month Wal-Mart cut prices on 16,000 back-to-school items, part of a renewed push to tout itself as the retailer with the lowest prices.

“Maybe with a slowing economy, that message may even resonate a little bit wider than it did before,’’ said Rick Rubin, a Baltimore-based analyst at PNC Wealth Management. The firm’s $77 billion in assets include Wal-Mart stock.

Shares of Wal-Mart, based in Bentonville, Arkansas, climbed 27 cents to $46.34 at 10:05 a.m. in composite trading on the New York Stock Exchange. They have risen 2.6 percent in the past year before today, compared with a 9.8 percent gain on the Standard & Poor’s 500 Retailing Index.”

Do you know why you would never know Wal-Mart was in trouble? Because they aren’t!

In 2000, Lee Scott’s first full year as CEO, Wal-Mart’s profits were $6.295 billion. Last year, Wal-Mart’s profits were $11.284 billion. That is growth of $4.989 billion in 6 years! This equals an annual profit growth rate of 13.2% during Lee Scott’s tenure! Is Wal-Mart in trouble?

I laugh at WMW’s assertion that Carl Ichan or some other activist investor taking a run at Wal-Mart and forcing changes. For Ichan to go over 5% in Wal-Mart, he would need to round up about $9.5 billion. In other words, if he liquidated everything he owned and borrowed another billion or so, he could buy 5% of Wal-Mart. This is a far cry from a controlling block (51%) of GM, which you can pick up for about $6.6 billion. Funny stuff!!!!

According to Morningstar, Wal-Mart’s 10-year average revenue growth is 12.8% and operating income is 13.5%. According to the Morningstar stock grades, the retail industry average in growth is B-. Wal-Mart is B +. Industry profitability is B +. Wal-Mart is A. Industry financial health is A -. Wal-Mart meets the average of A -, despite massive capital investments.

Wal-Mart is in trouble? Where? By whose standard? Consumers are still flocking to Wal-Mart. We spent thousands of dollars there last year. They are always busy. I shop at 4 different Wal-Marts and 2 Sam’s. BUSY BUSY BUSY.

Yes, just ignore that $345 billion in sales. Pretend Wal-Mart has $0 in sales and then you can believe that they are in trouble.

Nick in
Monday, August 13 at 06:25 PM

I Just Love it When Nick Chokes on His Own Words

“Yes, just ignore that $345 billion in sales.”

Well apparently someone has been ignoring Wal-Mart this past year Nick. Remember your great prediction?

“If Wal-Mart grows sales at this same “lackluster” rate for the entire 2006 year, and maintains a 3.68% profit margain as they did in 2005, their 2006 sales will be just over $359 billion and their profits will be more than $13.2 billion. I think it is safe to assume that they will do better. I am guessing 2006 sales of $365 billion and profits of $13.5 billion. You heard it here first.”
Posted by Nick - July 7, 2006 08:48 AM

If not, maybe you remember this:

“There is always the possibility that I am wrong and, unlike the Wal-Mart haters here, I am man enough to admit it when I am. If I am wrong on this, I will post a statement saying that I was wrong...”
Posted by Nick - June 19, 2006 04:25 PM

Yeah, that’s right Nick, we heard it from you first, and I’m sure we’ll be seeing your post real soon, won’t we?

ScrewedbyWal-Mart in Anytown, America
Monday, August 13 at 07:19 PM

These are empty words by Nick.
He can not support his false statements that he claims others have made. As far as being “man enough to admit it....” well he doesn’t even show up on the gauge.

R E M E M B E R
J O N Q U I E R E
Q U E B E C
Home of Walmart Worker Abuse
We will never forget what you did Walmart.

R E M E M B E R
J A C K S O N V I L L E
T E X A S
Home of Walmart Worker Abuse

Alex in Ontario, Canada
Monday, August 13 at 08:02 PM

Wat to bring something to the table, Alex! Feels good, doesn’t it? ^5!

Ken V in Texas
Monday, August 13 at 09:04 PM

Alex,

You said about Nick “...well he doesn’t even show up on the gauge”

And you do??

Laughable, indeed!

Bill

Bill in
Monday, August 13 at 09:05 PM

Screwedby,

And, what about your predictions, huh?

1.) Gas prices would be over $5.00 a gallon by the end of 2006!!

2.) The Maryland “Fair Share” legislation would hold up!!

3.) The Chicago $10.00 minimum wage for ‘big box’ stores would hold up!!

How many of those were accurate?

RDS in
Monday, August 13 at 10:37 PM

Alex,

You said about Nick “...well he doesn’t even show up on the gauge”

And you do??

Laughable, indeed!

Bill

Tell me more Bill.
Show me how I do not show up on the gauge?

R E M E M B E R
J O N Q U I E R E
Q U E B E C
Home of Walmart Worker Abuse
We will never forget what you did Walmart.

R E M E M B E R
J A C K S O N V I L L E
T E X A S
Home of Walmart Worker Abuse

Alex in Ontario, Canada
Tuesday, August 14 at 05:07 AM

I Was “Talking” to Nick, NOT You, RDS!

Somehow I just knew you’d come back with your stink about my “so-called” prediction that gas prices would top $5.00 per gallon before the end of 2006.

So for your benefit and to bring newer readers up to speed, these are all of the posts I’ve ever made concerning “$5.00 gas.” Do you see anywhere where I said it would happen before the end of 2006? We are just one war away, one more hurricane hitting New Orleans away, or one more “9-11 type incident,” from that price.

“OH...now Nick is an expert on corporate taxation. Who cares what he agrees or disagrees with! By the way Nick,I think your girlfriend is an idiot too. I hope for her sake the price of gas tops $5.00 a gallon!” Posted by ScrewedbyWal-Mart

There isn’t a level playing field with China right now...the Chinese government subsidizes factories and the Chinese currency is still greatly undervalued which puts American exporters at a great disadvantage. If you are in favor of building up the Chinese economy, are you also in favor of paying $4 - $5.00 for a gallon of gas? ScrewedbyWal-Mart in Anytown, USA
January, 2006

Enjoy your cheap gas while you can Bob. The $3.00 per gallon figure I used was more of a national average. Given the region of the country you live in, it wouldn’t surprise me if Wal-Mart is “subsidizing” the price of gas in Arkansas.
You better hope that Georgie Boy and his cronies in the White House don’t start another war...this time with Iran. You also better hope the Chinese economy slows down a little. All those new middle class citizens we’re helping to create are going to want to purchase autos etc. Why do you think China’s third-largest oil producer made a hostile $18.5 billion bid for U.S. oil company Unocal Corp. last June?
Read between the lines Bob...enjoy your cheap gas while it lasts.
Posted by ScrewedbyWal-Mart, April, 2006

Unless you can quote me RDS, just put one of your cheap Wal-Mart socks in your mouth. I believe it was YOU RDS, who said that Nick did not appoint you as his spokesperson. Would you quit acting like he has!

ScrewedbyWal-Mart in Anytown, America
Tuesday, August 14 at 07:24 AM

Screwedby,

“Unless you can quote me RDS, just put one of your cheap Wal-Mart socks in your mouth. I believe it was YOU RDS, who said that Nick did not appoint you as his spokesperson. Would you quit acting like he has! “

First, I was not speaking for Nick, I was speaking for myself!! Next, look up your comments about $5.00 gas on the WakeUpWalmart site, it might be posted as TOM!!

Then, there is the fact that the wholesale price of gas, is $1.92 a gallon, therefore, the main reason for a price difference across the U.S. is usually taxes!! And, if Wal-Mart is,"“subsidizing” the price of gas in Arkansas”, how come the price is cheaper in Missouri and other states?

RDS in
Tuesday, August 14 at 09:22 AM

I Always Knew You Were Slow, RDS

“...look up your comments about $5.00 gas on the WakeUpWalmart site,...”

Why would I need to “look up” my comments? Since I’m the one who made them, I should know what I said. I obviously keep better track of what I say than you do of what you say. Where do you think the 3 posts I referenced came from, if NOT the WakeUpWalmart site?

Oh that’s right, they banned/blocked you from posting on that website, didn’t they “Bob?” Come to think of it, I didn’t see either you or Nick posting much during the late summer/early fall of 2006 on WakeUpWalmart.com You both had been posting several times a day...then nothing from either of you. Where did you both go?

ANSWER:You had changed your “blogging handle” from Robert Springer in Springdale, AR to “Bob-in” and you were busy posting away on this blog. (Walmartwatch.com)

Now this raises the question, “Why did you suddenly switch from “Bob-in” to RDS?” Could it be that you had been blocked again? We won’t even start to get into all of the various “handles” Nick has used in the past 2 years or so.

I’m beginning to see Alex’s point about you and Nick. You make statements, but can’t back them up. Show me where I ever said, “Gas prices would be over $5.00 a gallon by the end of 2006!!”

ScrewedbyWal-Mart in Anytown, America
Tuesday, August 14 at 10:27 AM

screwed, you are good at going back and finding old posts from anyone you need to quote. I find that odd that you can quickly locate posts from even a year ago. I may have missed it before but do you work for WMW? You may have already admitted it and I just missed the post.

Big T in Rogers
Tuesday, August 14 at 01:32 PM

Screwedby,

“Come to think of it, I didn’t see either you or Nick posting much during the late summer/early fall of 2006 on WakeUpWalmart.com You both had been posting several times a day...then nothing from either of you. Where did you both go?”

Once they went to the edit function at WUWM, where the posts wouldn’t show up for sometimes days, I quit posting there!! Besides, that site is basically dead, with only a few posters, like steve that works at a grocery store!! I have posted a couple of times in the last few months, but avoid it normally!!

““Why did you suddenly switch from “Bob-in” to RDS?” Could it be that you had been blocked again?”

I explained that a couple of times, somebody was posting as ‘me’, even now, at times, my RDS is being used by someone else, guess that someone was afraid I was being effective, so they had to try to discredit me!! If I was being blocked, wouldn’t it pick up my IP address, no matter what name I used?

As for your $5.00 a gallon gas comment, you proved that you actually used that amount at least twice and while I may be wrong about the time line, it was in 2006 and I may have misinterpreted as to when you said it would occur, as that was over a year ago!! But, I see you haven’t denied the other 2 predictions!!

RDS in
Tuesday, August 14 at 06:06 PM

This is as good as it gets from you, RDS

“I may have misinterpreted as to when you said it would occur...”

I guess this is as close to an admission that you were wrong in your assertion about my comments on $5.00 gas, RDS. Have you ever checked out the price of gas/petrol in Europe? You act like $5.00/gallon gas is an impossibility, RDS.

As for my other 2 “predictions"… I wasn’t the only one who preferred to see a different outcome. It was more of a “hopeful wish” than any real “prediction” on my part. The truth of the matter is--I wasn’t close enough to either of those two situations to say with any degree of certainty how they would go.

I and so many others were right about Wal-Mart NOT getting its coveted ILC. And before you start getting too giddy over the results of Maryland’s “Fair Share” legislation or Chicago’s Minimum wage for big box stores, let’s just wait and see how the largest class-action lawsuit in history turns out.

ScrewedbyWal-Mart in Anytown, America
Tuesday, August 14 at 11:16 PM

I find that odd that you can quickly locate posts from even a year ago.

Hey, Big T, if you’ll scroll all the way back up to the top of this page on the right-hand side is:

SEARCH WAL-MART WATCH

The beauty of these site search engines is all you have to remember is a key word or phrase.

but do you work for WMW?

Screwed’s posts could easily be mistaken for the work of a polished professional.

Ken V in Texas
Wednesday, August 15 at 03:35 AM

My “Sarcasm Detector” is Working Just Fine

Unlike you, Ken I didn’t need to check the batteries in my “sarcasm detector.”

“...could easily be mistaken for the work of a polished professional.”

If you’re trying to start some kind of “pissing match,” it didn’t work!

ScrewedbyWal-Mart in Anytown, America
Wednesday, August 15 at 07:34 AM

Ken V,

See what a ‘negative’ attitude gets you, you give Screwedby a compliment and he takes it as “sarcasm’ and accuses you of trying to start a “pissing match”!! When a person has a ‘negative’ attitude, they become ‘paranoid’ and think that everyone is out to GET them!! All they ever see, is what is WRONG with the world and not what is RIGHT with it!!

RDS in
Wednesday, August 15 at 10:53 AM

Yeah...It Figures, RDS

It figures you’d be the first to “chime in.”

If I was wrong in my understanding of Ken’s remark, then I am man enough to admit it, and I apologize for my mistake. If it was meant to be a “compliment,” then I failed to see it. Up until now, I’ve had no differences with Ken, and I’m not going to let you throw in your worthless two cents to change that.

That’s the thing about forums like this...words can sometimes be misunderstood without other visual clues like body language etc.

Here’s an example maybe you can relate to. If I said to you (as I believe I have on some occasions), “You must have me mistaken for someone who cares,” the meaning would clearly be that I don’t really care! Would it not?

Now, speaking of retractions, what were those words of Nick again?

““There is always the possibility that I am wrong and, unlike the Wal-Mart haters here, I am man enough to admit it when I am. If I am wrong on this, I will post a statement saying that I was wrong...”

We’re still waiting, Nick.

ScrewedbyWal-Mart in Anytown, America
Wednesday, August 15 at 12:03 PM

RDS,

I seriously doubt that Ken V was complimenting Screwed. I took it as sarcasm too.

Thanks Ken V for pointing out the serch engine. I am going to try it out right now.

Big T in Rogers
Wednesday, August 15 at 02:06 PM

Where is Bobbin?

“Wal-Mart is in trouble? Where? By whose standard? Consumers are still flocking to Wal-Mart. We spent thousands of dollars there last year. They are always busy. I shop at 4 different Wal-Marts and 2 Sam’s. BUSY BUSY BUSY.”

FOUR different WalMarts? Dude, you might want to get an organizer, or maybe a personal assistant.

south Side in chicago
Saturday, August 18 at 03:21 PM

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