In addition to being downright evil Wal*mart is in fer a whoopin' because its business model broke this year. Cheap transportation and municipal "assistance" for but two legs on their stool are gone, not wobbly, gone. Another leg of their stool, how about cheap goods from China? Oooops. How's that workin' fer ya Ghost of Sam? I can see it in their pricing structure of different goods segments. DVDs cost 4¢-10¢ to manufacture. Rights/distribution for places like Wal*mart are a buck or two or three maybe. These have room for using price points to draw and they are. Bins in the aisle full of second rate movies $4 and $5 each. But, slide on over to spark plugs or light bulbs and there is no margin left to cut. Those are little items. Last year big mold blown plastic toys (kiddie teahouses or forts) were inexpensive. This year, let's see; Chinese wage inflation, oil product materials input, transportation, handling. All saw monster price inflation. Christmas this year may not be an orange and new sneakers but it sure ain't gonna be like 2002 either.
Two final points on the evil octopuses' tentacles getting chopped off. They bought a whole lotta CRE for themselves and as anchor (them) adjacent investment in the boom years. Those two don't look so hot going forward. Lastly, is the most important but least quantifiable. Their business model generally relies on externalizing costs and internalizing control. For decades they've been clearcutting and strip mining supplier expertise for uncompensated export to "other" unnamed countries with fewer restrictions on things like human rights and pollution controls. American businesses are wising up to this transfer of expertise and its true costs.
14 comments:
First, I never shopped at Walmart.
Second, ...nope no second.
While Walmart's advantages may be gone, I do not see anything that will replace them. The result will be they will hang around like Sears. Never meeting margins, but not losing enough to close down.
Yeah, Wal*mart was last decades' story.
Good point serinitis but one big difference is that the real estate controlled by Sears is actually in valuable locations. WalMart usually holds some giant spot in a suburb, exurb, or rural location. I don't think that will help them.
That's exactly the point. Sears as a real estate empire is valuable just for the square footage. Wal*mart has crap too much and over paid. In recent years they made inner ring investments but invariably paid too much. The only times this worked was when they got "public participation." That's one of the legs that are gone for a very very long time.
In the past Wal-Mart's been more than happy to abandon a commercial building if they get better revenue in another location just down the street.
Don't see them or Sam's Club hurting - lower margins maybe, but they won't be doing a Bennigan's (sp?)
Commercial real estate has always been more of a boom/bust business than residential, and we're just getting started on the commercial bust.
Even Sears' real estate will be depressed for some time to come.
I would be careful typing up that obit just yet.
1. they are large. Like GM, they can weather a long time waiting for the economy to change.
2. They have made inroads into Europe. Like all other multinationals, they will spread their stores and find countries that have solid economies to offset countries in the tank.
3. When Sears went down, it was because they had to fight small boutique stores in the 80s. this is about inferior goods. There are always folks who will go there because of price. Usually driving slowly in the left lane 3 miles before they get there...
4. If you have the volumes, a good Logistics team can work all kinds of interesting angles to keep the prices down. They have that kind of volume and they have those kind of smart guys in Ak.
But this is bigger then Wallyworld.
For the past 5 years we have seen the same stupid MBA crap of outsourcing every job until the economy tanks and the board figures out nobody has a real job so they have no money. Been 20 years since the last generation of cement heads learned their lessons.This time it is their spawn.
Going to get a lot more ugly before it is done. Just wish they would outsource Havard Business School to Bangalore..
I've never been to Wal-Mart either, but it sucks anyway.
Wal-Mart makes the peasants happy. We should be happy that they are happy.
Sears as a real estate empire is valuable just for the square footage.
That was Jimmy Cramer's pitch 2 years ago when he was saying Sears would be the next Berkshire Hathaway because of its real estate holdings. Last I checked, malls were dying off left and right. Malls suck.
Sears does have value, but the value is in its brands, not its real estate.
Remember when Cramer's radio show was just about to go off the air? He loved Sears, the IBs, Yamana and home builders. At least Yamana is back where it was then.
IMO Sears real estate holdings are undervalued even at post bubble rates.
Wal-Mart is evil and I refuse to shop there. Well, except for absolute necessities, because they tend to be cheaper on some items. But I only buy the items that are cheaper than they are elsewhere! Or when it happens to be more convenient like when I'm driving by and I remember something I need. But that's it! And I only buy just what I need, nothing more. Yep. I mean, if I see something cool on sale I might pick that up, who wouldn't? It would be stupid not to. But that's it. Otherwise, I refuse to deal with Wal-Mart at all. McDonald's too. Though their coffee is pretty good .. but that's it ...
Rob, it's Walmart*, not Wal*mart:
http://www.underconsideration.com/brandnew/archives/less_hyphen_more_burst_for_wal.php
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