MarketWatch on Wal-Mart’s Quarterly Earnings
Retail consultant Burt Flickinger III weighs in on Wal-Mart’s financial problems. He calls the retailer’s quarterly earnings a “train wreck,” and explains that the stopgap measures Wal-Mart has been employing - cutting staff and raising prices - are no longer going to work. He calls for new leadership for the company, citing poor labor relations as one of the reasons why the retailer is struggling with its bottom line, and insists that financial problems will dog Wal-Mart until the deeper, underlying issues are resolved. From MarketWatch:
Transcript:
John Wordock: Two major retailers are reporting news. Wal-Mart says that it is cutting its estimate for the fiscal year, despite a nice 49% rise in net income, and Home Depot is also signaling some trouble: it is saying that the housing slump is taking a toll on its business. Joining us to talk about the impact that the slowing economy or the housing recession (as some are calling it) is having on these two major retailers is Burt Flickinger III, he the managing director at Strategic Resources. He’s a retail consultant. Burt, let’s tackle Wal-Mart first. What do you make of this news coming out of Wal-Mart?
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Posted by Alex Goldschmidt on Tuesday, August 14 | 16 comments | Permalink
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.
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Posted by Alex Goldschmidt on Monday, August 13 | 21 comments | Permalink
‘The High Cost of Low Prices’ Airs on Starz
Brave New Films’ “Wal-Mart: The High Cost of Low Prices” will be airing throughout July on the Starz network. It’s a great chance to see the movie if you haven’t already, or to introduce friends and colleagues to the issues raised in the film.
The director’s cut of the film will be airing on the following dates:
| Starz Cinema July 25, 11:15 am | Starz Cinema July 25, 8:20 pm | |
| Starz Cinema July 26, 3:14 am | Starz Cinema July 30, 6:00 pm | |
| Starz Cinema July 31, 4:00 am | Encore Drama August 21, 2:20 am |
Be sure to also check out some of the bonus scenes that were not included in the film.
Click here for more info on the screening.
Posted by Alex Goldschmidt on Tuesday, July 17 | 13 comments | Permalink
Bank of Wal-Mart: Better Than Loan Sharks
Wal-Mart’s bank gets hotly debated in BusinessWeek and Advertising Age today. The main argument in favor of the company getting into banking? It’d be better than loan sharks.
In a classic case of being the lesser of two evils, Wal-Mart’s financial services are a far cry from the poverty cure Advertising Age paints them to be. While it’s true that Wal-Mart’s rates are lower than check cashing services, neither are sustainable routes to fiscal solvency for low-income shoppers. The fact remains, as Advertising Age points out, that exploiting the poor is a big market and is indeed one of the ways Wal-Mart makes its billions.
Wal-Mart: Stay Out of Banking, Period [BusinessWeek]
Pro: Not in the Best Interest
The Independent Community Bankers of America (ICBA), representing 5,000 small financial institutions nationwide, strongly opposes the entry of commercial enterprises such as Wal-Mart (WMT) into retail banking. ICBA has nothing against Wal-Mart stores, just Wal-Mart banks.Con: Simply Filling a Need
The hue and cry over Wal-Mart’s attempts to expand its financial-services business is largely motivated by a single fact: The company will offer these services at a lower cost to the consumer, taking revenue away from competitors that happen to include banks. So what else is new?
Forget Going Upscale—Wal-Mart Should Serve Needs of Poor, Seniors [Advertising Age]
Serving the poor is a big market, and providers like to say how proud they are to give credit and debt products to people who couldn’t get them from traditional lenders. But the interest they have to pay for such services is astronomical, and many people are left holding the bag for thousands of dollars in interest or being unable to pay their mortgages, leading to the current subprime-lending mess.
More on Wal-Mart’s banking practices >>
Posted by Alex Goldschmidt on Monday, July 09 | 42 comments | Permalink
Wal-Mart’s Banks No Help to Bankless Customers
“These cards are loaded with hidden fees,” Wexler said. “And many consumers will find that there are cheaper and more practical options elsewhere.”
Wal-Mart banks on its (non) bank [Florida Sun-Times]
Following years of failing to get a bank charter, Wal-Mart has entered the financial fray with a broad selection of financial services, from check cashing to a Visa-branded card with nary an overdue charge.
The world’s largest retailer plans to open 2,000 MoneyCenters in its stores, up from its current 225 locations. At least one will be in Jacksonville, located in Mandarin at 9890 Hutchinson Park Drive.Slated to open by the end of 2008, this is a rapid rollout of financial services, including check cashing and a prepaid, reloadable Visa card, geared for those who don’t pass muster during the credit check process required for typical credit cards. Wal-Mart says the expanded selection will provide low-cost banking options to those who don’t have traditional bank accounts.
“With the Wal-Mart MoneyCard, our customers can do things that they couldn’t do before - shop and pay bills by phone or online, pay at the pump and use ATMs across the country,” said Cindi Marsiglio, a Wal-Mart spokeswoman.
But critics are charging that Wal-Mart is sneaking into banking, a venture it appeared to abandon after being legally rebuffed by the Federal Deposit Insurance Corp. Nu Wexler, a spokesman for watchdog group Wal-Mart Watch, says the retailer’s financial services are so loaded with extra costs and fees, it exploits the very customers they say they want to help.
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Posted by Alex Goldschmidt on Monday, July 02 | 26 comments | Permalink
An Analysis of the Non-Banker
Grandma stuffing money under the mattress isn’t the only one living outside the banking system.
As many as 28 million people in the United States are forgoing traditional financial institutions because of mistrust, cultural and language barriers or a belief that by the time all the bills are paid there will be nothing left for an account.
That can be expensive and risky. People can run up big fees to cash checks, pay bills and meet their other financial needs. Walking around with large amounts of cash can make them a target for thieves.
The bankless are estimated to earn hundreds of billions of dollars a year in income. Seeing a business opportunity, banks are trying to draw in these potential customers. So, too, are check-cashing businesses and retailers, including Wal-Mart.
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Posted by Alex Goldschmidt on Monday, June 25 | 2 comments | Permalink
Wal-Mart Banks on the Unbanked
“[W]hen Wal-Mart decides it cares about a business, they usually find a way to dominate it.”
Wal-Mart’s Unbanking Business [Time]
Wal-Mart doesn’t just want you to buy gas and groceries at its superstores these days. Now it wants your entire paycheck.
On Wednesday, the nation’s largest retailer unveiled plans to open 1,000 in-store MoneyCenters aimed at serving the 40 million or so people without traditional bank accounts. The main draw at the centers, which will be in about a quarter of all Wal-Mart stores by the end of 2008, is the cashing of government and printed payroll checks for the bargain price of $3 a pop. The retailer is also debuting a reloadable, prepaid Visa debit card that does not require a bank account or proof of U.S. citizenship.
This broad rollout of low-priced check-cashing and debit cards marks a milestone for the millions of “unbanked” Americans who have long had to pay rates as high as 10% of the face value of their paychecks in order to cash them and then pay cash for every single purchase they make because they do not qualify for a credit card or checking account. “These are our core customers. We probably have more than others of this underserved customer,” says Jane Thompson, president of Wal-Mart Financial Services, who notes that the average check-cashing customer at Wal-Mart earns $350 per paycheck and has never had a credit card before.
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Posted by Alex Goldschmidt on Thursday, June 21 | 10 comments | Permalink
Banking? Who, us??
Wal-Mart has been trying unsuccessfully to get in to the banking industry for months. Click here for an archive of stories relating to the company’s attempts.
Wal-Mart’s New Nonbank Bank [BusinessWeek]
Earlier this year, on Mar. 16, Wal-Mart Stores abandoned plans to create its own bank. The retailing giant withdrew its application for a bank charter in the face of tremendous opposition from competitors, as well as from politicians in Washington and state capitals.
But the world’s largest retailer certainly hasn’t given up hopes of taking on the financial-services industry. On June 20, the Bentonville (Ark.) company came back with an announcement that it will offer a host of financial services to its customers through WalMart MoneyCenters, including check cashing, bill payments, and international money transfers. Wal-Mart will open financial-service centers in 450 stores by the end of 2007 and in 1,000 stores by the end of 2008.
As part of its services, the company will issue a Wal-Mart MoneyCard, a prepaid Visa card, which will cost $8.95. It can be used like a credit card to shop online, and to pay for gasoline and merchandise at other retailers. The card will be available at most Wal-Mart stores by yearend. “Many of our customers are paying too much, traveling too far, and not being well served,” says Jane Thompson, president of Wal-Mart financial services.
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Posted by Alex Goldschmidt on Thursday, June 21 | 21 comments | Permalink
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