Wal-Mart’s Road To Nowhere (WMT)
During the third quarter of the year, Wal-Mart’s stock went from $48.91 to $49.32, or 1.1%. In an unusual show of solidarity with WMT’s investors, same-store sales rose only 1.8% in September. The company’s customers must have called its investors on the phone.
Wal-Mart had all kinds of reasons that store sales were not more robust. Comparisons with Katrina-related events were at the top of the list. But, the company had said that same-store figures would be up as much as 3%, so the news was not good.
The unavoidable truth for Wal-Mart is that sales in the US are, if the months are evened out, slowing sharply. The company is just too big with too many stores. The easy share is not longer there for the taking.
As investors combine the news in the US with the sale of Wal-Mart units in South Korea and Germany, the evidence is mounting that China has become absolutely critical part of the company’s ability to grow. According to The Economist, Wal-Mart’s sales grew 31% in China last year and its number of stores in the country was up 30%.
Wal-Mart’s expansion in China is not without problems, especially as local unions become involved. Because these labor organizations are controlled by the government, it is still impossible to say whether the Chinese bureaucracy will want a role in the operation of Wal-Mart stores in the country.
With growth in the US only matching the rate of inflation and Wal-Mart abandoning some key markets, the options for the company to return to rapid top-line growth become fewer and fewer.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
Wal-Mart had all kinds of reasons that store sales were not more robust. Comparisons with Katrina-related events were at the top of the list. But, the company had said that same-store figures would be up as much as 3%, so the news was not good.
The unavoidable truth for Wal-Mart is that sales in the US are, if the months are evened out, slowing sharply. The company is just too big with too many stores. The easy share is not longer there for the taking.
As investors combine the news in the US with the sale of Wal-Mart units in South Korea and Germany, the evidence is mounting that China has become absolutely critical part of the company’s ability to grow. According to The Economist, Wal-Mart’s sales grew 31% in China last year and its number of stores in the country was up 30%.
Wal-Mart’s expansion in China is not without problems, especially as local unions become involved. Because these labor organizations are controlled by the government, it is still impossible to say whether the Chinese bureaucracy will want a role in the operation of Wal-Mart stores in the country.
With growth in the US only matching the rate of inflation and Wal-Mart abandoning some key markets, the options for the company to return to rapid top-line growth become fewer and fewer.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
posted by douglas mcintyre at 5:45 AM
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