Wal-Mart’s
stock price sank to a 52-week low today,
after years of disappointing returns to
investors, and as the retailer announced
slow profit growth in Q2 and reduced financial
expectations for the year due to pressure
on consumers from higher gas prices and
other factors.
Sales
and profits were up, but at rates that again
paled in comparison to historical percentages.
Sales for the quarter on a global basis
increased by about $7 billion, or roughly
8%, but that includes new international
business and new store openings in North
America.
Same store sales at Wal-Mart stores in the
U.S.
rose just 1.2% percent. Profits rose only
by about 5%, helped by gains outside of
operations, without which they would have
been nearly flat.
"Although
some people will report that Wal-Mart has
had record sales and earnings, our underlying
operating performance this quarter is not
what we expect of ourselves, and not what
our shareholders expect of us," said
CEO Lee Scott.
While the
media is widely reporting Wal-Mart’s
Q2 results, which are being blamed for an
overall down day on Wall Street, no one
seems to remember that earlier this year
the same business media was abuzz with stories
about Wal-Mart’s super-secret plan
to raise its share price, code named “Project
Red.” The strategy was considered
so sensitive that the company's high-priced
consultants were only allowed to work on
parts of the whole strategy and made to
toil in extremely high security offices,
while a former top Wal-Mart security chief
fired by the company detailed some of the
extreme monitoring tactics the company used
(see Does
Wal-Mart have Super Secret Plan to Spin
Off Sam’s Club?).
The plan
reportedly involved a spin-off of its Sam’s
Club chain as one component, but later reports
said that idea had been quashed.
So a logical
question is: Where is the plan now, when
it seems to be needed most? Still being
developed, or forgotten for some undisclosed
reason?
Wal-Mart
has struggled in its efforts to increase
market share in apparel and home furnishings,
but lately, home electronics has been a
bright spot. Plans to enable local stores
to have more discretion in product and merchandising
decisions do not seem to be getting much
traction or attention (See In
Search of More Growth, Wal-Mart Follows
Best Buy in Move to Tailor Stores to Individual
Markets).
To
keep things in perspective, Wal-Mart’s
increase of $7 billion in revenue for one
quarter is larger than most retailers manage
all year, nonetheless, it seems to many
that Wal-Mart’s enormous retail and
supply chain clout will diminish relatively
over the next decade, as it will simply
be unable to match the growth rates of other
retailers, including increasingly strong
competitors such as Target and Costco, and
as UK’s Tesco prepares to enter the
U.S. market.
Simply
meaning, at some point when Wal-Mart sneezes,
consumer goods company supply chains may
only catch a cold, not pneumonia.
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