Wal-Mart may be its own worst enemy

It's blaming a weak outlook on consumers cutting back. But then why are so many of its retailing rivals doing just fine?

By Jonathan Berr Feb 21, 2013 1:58PM
Wal-Mart store in Secaucus, New Jersey / Jin Lee/Bloomberg via Getty ImagesWal-Mart's (WMT) struggles, as seen in its latest quarterly report, are obviously not good news for shareholders of the world's largest retailer, but they might not be bad news for the country as a whole. That's because many of Wal-Mart's rivals are doing just fine.

When the U.S. economy started to tank, the Bentonville, Ark., company's low prices attracted cash-strapped consumers. But now, as the economy continues to rebound, consumers may be less worried about prices and more attuned to other aspects of their shopping experience such as customer service, which has never been a forte of Wal-Mart.

According to Wal-Mart, many people continue to struggle because of the rise in the payroll tax and delays in getting tax refunds from the IRS.

Wal-Mart's gloomy outlook confirms the sentiment echoed in internal memos recently leaked to Bloomberg News about the chain's poor performance in February. The company's forecast for first-quarter earnings was below Wall Street expectations, but the shares are trading up so far today. Raising its dividend by 18%, to $1.88 annually, is offsetting some worries about Wal-Mart's gloomy forecast.

Wal-Mart expects comparable sales to be flat in the current quarter as uncertainty about the economy continues to weigh on it. The Associated Press reported today that the number of Americans seeking unemployment benefits rose in the most recent week. Consumer confidence also declined in January.

These macroeconomic forces affect all retailers, but many are doing better than Wal-Mart.

Its chief rival Target (TGT) recently reported a better-than-expected 3.1% gain in January sales in stores opened at last a year. Comparable sales at TJX (TJX) rose 3% during the same time, exceeding the expectations of the parent company of TJ Maxx, Marshall's and Home Goods. Macy's (M), an up-market department store chain, recently reported that January same-store sales rose a better-than-expected 11.7%. (Wal-Mart doesn't report monthly sales.)

If Wal-Mart continues to struggle, investors may find it hard to believe that the fault lies entirely with penny-pinching consumers.

Jonathan Berr is long Target. Follow him on Twitter @jdberr.


422Comments
Feb 22, 2013 1:50AM
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As long as millions of people keep shopping at Wal-Mart they will be making billion dollar profits.  Besides, they also funnel millions of dollars for the re-election of the politicians that they have in their pockets.  There stock may go down but it really does not hurt them as they will still make a huge profit.  Big companies do not like to see there figures go down even by $1.00.  For each one of us who complains there are thousands of people who do not care and will continue shopping at Wal-Mart. 

Feb 22, 2013 1:47AM
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MOST OF YOU WALMART BASHERS PROBABLY GOT FIRED FROM WALMART !!  BE HONEST !!

THE USA WOULD FOLD LIKE A TENT WITHOUT WALMART !!  DO US A FAVOR AND DO ALL YOUR SHOPPING AT DOLLAR GENERAL !!

Feb 22, 2013 1:42AM
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Jonathan Berr :     YOU KNOW NOTHING !! YOU KNOW NOTHING !!  YOU KNOW NOTHING !!
Feb 22, 2013 1:26AM
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Wal-Mart stays in business because the American consumer is also a greedy little s.o.b.  The consumer could care less about Wal-Mart's treatment of its employess, low, low wages, lack of benefits, and lousy customer service.  All they care about is themselves.

The only way to send Wal-Mart a message is to STOP shopping in their stores.  Look at all the negative articles about Exxon.. yet we continue to stop off for gas at their gas stations.
Look at all the TSA complaints.  Just stop flying and the airlines will quickly replace the TSA.  The airlines will not tolerate a loss of income.

But the American consumer is either too lazy, stupid, or just ignorant on how to change things.

Feb 22, 2013 1:17AM
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wal-mart is the U.S.A.'s largest feeder corporation to the escalation of the Chinese Military

Industrial Complex...

Thanks for your $$$$ billions in contributions to the Chinese Military Engine Wal-Mart!!

Feb 22, 2013 1:12AM
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I hope they go broke, I feel sorry for the workers who would loose their jobs but you can't make a living wage working there unless you become a mindless drone-slave-master manager and even then you don't make that much more. The destruction of main street and the desperation of our working class is having a long term corrosive effect on our national sense of pride.

 

Do you think for one second if they went broke the stores would remain closed ??, not a chance a slightly less arrogant and abusive big box chain will fill the void, ANY improvement is better than nothing.

 

Feb 22, 2013 1:07AM
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During football season, I briefly considered buying a New England Patriots T-shirt until I read the label stating MANUFACTURED in PAKISTAN. REALLY WAL-MART ????
Feb 22, 2013 12:50AM
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I have to wonder if the quality of Walmarts varies on where they are? I don't hear many people complain about the Walmarts in the area I live. And they are definitely better priced then most. What few complaints I do hear seem to be exclusively from Union or pro Union people, which I have little sympathy for anyway.
Feb 22, 2013 12:47AM
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I worked at WalMart for a couple of years when I retired and quit, because I was tired of being verbally abused, and threatened with the loss of my job if something wasn't done. Customer service is almost non existent. Unfortunately, Walmart is the only game in town here. I also have a very hard time finding anything in the store that was not made in China!
Feb 22, 2013 12:41AM
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People should go after these three entities in this order: 1) U.S. Government 2) People who would rather leech off of the taxpayers 3) Walmart & other mega companies.
Feb 22, 2013 12:37AM
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I work at Walmart and I am a people greeter...most of our customers are wonderful; and a few have concerns.  I try to address their concerns and call on a member of management to help.  Can I find a member of management?  The answer is no.  There arent many employees on the floor to help customers as they have cut back our hours for months.  Staff is making minimum wage, works short shifts making sure to use our paychecks for the gas we use to get to this place of employment.  Lots of cash registers but with hours cut back...not many can work.  I have lost several hundred dollars in pay this year alone.  I agree customers are cutting back and they are buying necessities for their families.  Has nothing to do with income tax returns it means walking by all the cheap non essential items, stuff that breaks and just trying to get more for the money they have.  Employees are in the same boat as I spend half my paycheck in gas and half for food.  How can we change this?  Contact Arkansas  they seem to blame everything on the head office.

 

Feb 22, 2013 12:20AM
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I'm really looking forward for the new Cosco store to be built in our city, I will stop going to Wal-mart all together.

Wal-mart doesn't treat there employee's right at all, they are making billions and there employee's don't make enough money to make a decent living, shame on Wal-mart..

Feb 22, 2013 12:08AM
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I hate to shop at WalMart, not because of the merchandise offered but because of the customer service, it's just plain terrible.  Then the long lines at the checkout, there is twenty checkouts with two open.  I' m a basket case after going there. 
Feb 22, 2013 12:07AM
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What other Company turns a blind eye when people bring their Dogs in the store in their cart or their arms?  What other Company is famous for their customers who wear PJs & Slippers and smell bad?
Feb 22, 2013 12:00AM
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Walmart serves a purpose.  I am sure all of you while the economy was down and salaries frozen, or you may have been unemployed appreciated walmart for its low prices it may not have been the best service experience but a lot of people were able to put some food on the table for their children in hard times because walmart does keep its prices down.  You all can continue to kick the company while it is down but a lot of you probably were not saying this a short time ago.  As far as the low wages they pay employees etc.  Just so you all are clear on this I have never opened my door to a walmart sales person begging me to apply.  These people chose to work there.  This is the same mentality of people who expect the government or someone else to take care of them.  I am quite sure this country will continue being as successful as it is if we continue thinking we can drop out of school in 6th grade, put that same effort in our work ethic and just be handed 6 figures per year.  Walmart and similar jobs are for people for whatever reason can't or won't do better for themselves.  Walmart does promote from within and every employee can grow if they chose to apply themselves.  I do not nor have ever worked for walmart, but I do work for a company that the starting wages are comparable and a starting position is part time.  I have worked for this company for 21 years and started at 15.  I chose to stay and I chose to apply myself and I have a great life because of it.  I do have great benefits, company car 7 weeks of vacation and an income that supports 6 of us comfortably.  That all came from the part time minimum wage job I decided to apply my self at 21 years ago stop complaining and work hard it is nobody's fault but your own and only you can change your life not walmart, not Obama, ONLY YOU.
Feb 21, 2013 11:53PM
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Walmart has been successful in squeezing suppliers for rock bottom priceing and if they couldn't give anymore, they would drop them like a hot potatoe and put them out of business.

There are better companies out there...they didn't succeed in Germany and had to leave that market

Feb 21, 2013 11:46PM
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I am curious about this continuing rebounding economy. Unemployment higher than it has been since the great depression. The price of all goods increasing on a steady basis. Taxation constantly increased, sometimes by the premise of calling it a fee. All the while the government is spending money like there is an endless supply. I guess when you control the printing press that makes the dollar it might seem it is endless. However when you continue to print money that has nothing to back it other than foreign investment, borrowed money from China, the end result when the United States is unable to pay off the debt will be catastrophic. The appearance of rebounding economy is smoke and mirrors. When the promissory note that the U.S. holds is called in for collection, and there is no way of making good on the debt,the foreign investors will drop the U.S. dollar. Once this happens all government issued checks, all programs and entities ran by the government will cease operation immediately. Inflation on goods will increase immediately in such a manner all common people, meaning all middle class and lower, will not even be able to think about their purchase. I am baffled every day at the B.S. shoved our way, and by the absurd number of clueless people who gobble it up by the shovel full. 
Feb 21, 2013 11:15PM
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I took a job at Wal-Mart because at age 55 they were the only ones who would give me ANY job.  I have over 21 years of experience as a manager with a northeastern restaurant chain.  I have 20 years experience in  the financial field.  what  I have found is when it comes to customer service Wal-Mart is no different from any other company.  A store is only as good as the manager who runs it. In order to have good customer service the manager must fight the CORPORATE MENTALITY.  Corporate mentality works like this:  the corporation wants to drive the most money to the bottom line. To do that they must cut costs.  The biggest controllable cost is labor so pressure is put on management to run with fewer people and pay them less money.  What they don't realize is that this causes poor service and sooner or later people will stop shopping there.  This will cause sales to decrease which will make the bottom line smaller!  If you have no top line (sales) you can't drive the bottom line (profits). This is not a Wal-Mart problem but a problem throughout corporate America.
Feb 21, 2013 11:11PM
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IF Wal Mart would not have raised their prices so much and have things in stock like they should, people would not go to the other stores.  And keep the Fabrics and sewing notions and yarns all at a decent price so the people that are on fixed incomes could afford them and the fabrics for the quilters that it is so not high priced it would be great, Listen to the costomers.  They do know what they want and need.        Listen to the patrons.
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