What's the matter with Wal-Mart?

Bribery investigations and lackluster sales dog the world's largest retailer.

By Jonathan Berr Nov 15, 2012 12:09PM

Jin Lee Bloomberg via Getty ImagesShares of Wal-Mart (WMT) tumbled in early trading after the world's largest retailer reported lackluster sales, disclosed that investigations into alleged bribery overseas have expanded and gave uninspiring guidance. To add insult to injury, rival Target (TGT) reported better-than-expected earnings.

Net income at the Bentonville, Ark. company rose 8.7% to $3.64 billion, or $1.08 per share, versus $3.34 billion, or 97 cents per share, a year earlier. Revenue rose 3.4% to $113.9 billion. Same-store sales, a key retail metric measuring activity at stores opened at least a year, rose 1.5%. Wall Street expected Wal-Mart to earn $1.07 per share on revenue of $114.95 billion. Analysts also expected Wal-Mart to post same-store sales growth of 2%, according to Bloomberg.


Wal-Mart came under fire earlier this year after the New York Times reported that the company ignored evidence of widespread bribery at its operations in Mexico. The U.S. Department of Justice and the Securities and Exchange Commission are investigating whether Wal-Mart's actions in Mexico violated the Foreign Corrupt Practice Act (FCPA). Wal-Mart has spent $99 million on its response to the allegations and defending itself against related lawsuits.


The company also disclosed Thursday that it had launched internal probes into possible FCPA violations in China, Brazil and India. Companies do these sorts of internal probes because the federal government might go easier on them in future legal proceedings if they find evidence of wrongdoing themselves.

Looking ahead, Wal-Mart said it expects fourth quarter earnings to be between $1.53 a share and $1.58 a share, a penny lower than Wall Street expectations. The company expects full-year results in the range of $4.88 per share to $4.93 per share, versus earlier forecasts of $4.83 per share to $4.93 per share. Wall Street expectations were for profit of $4.94 per share.

Wal-Mart's argument that its earnings performance is reflective of the overall economy doesn't hold water given how well Target is doing. The smaller rival handily beat Wall Street's expectations, Reuters reported, and is probably expanding its market share ahead of the important holiday season.

 

One reason why Target is succeeding and Wal-Mart is floundering has to be store design. Shopping at Target is a pleasant experience because its stores are well-lit with merchandise that is easy to find. Wal-Mart stores, at least the ones I have seen, tend to be dingy and the layouts tend to be confusing. My family and I have been loyal Target shoppers for years, and we rarely venture into Wal-Mart, even though there is a location that isn't far from us.

 

Though Wal-Mart's prices are undoubtedly low, that strategy has its limits. People who shop solely based on costs are probably the least loyal consumers around. If Wal-Mart ever hopes to emerge from its slump, it will need to offer consumers something more. Exactly what that may be is tough to say.

 

Investors should stay clear of Wal-Mart stock for the time being. Besides, Target is a much better value. The Minnesota company currently trades at a price-to-earnings ratio of 14.05, well under its five-year high of 17.04, according to Reuters. The average 52-week price target on Target is $70, more than 13% above where it currently trades.

 

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

Tags: TGTWMT
865Comments
Nov 16, 2012 2:00PM
avatar
There is no such thing as just "running into" walmart to grab something.  Parking sucks, nothing is where it should be, even the workers don't know where stuff is, and to top it all off, only 2 of the 50 checkout lines are ever open.  I hate going into walmart with a passion.
Nov 16, 2012 1:59PM
avatar

one other thing that's wrong with Walmart, entitlement at any cost.  read this article.

 

"College removes name of Wal-Mart heiress on arena" dtd 11/24/2004

Nov 16, 2012 1:59PM
avatar

Walmart is a very dangerous place to shop i had a very bad experience with walmart andhose  G I JOE AND G I JANE they hire to protect you they come when everything is over and those managers they hide when trouble  happens........i guess what they are getting paid for is not oh risking their life because they have an unruly customer but i have to applaud the young lady that took the wle thing from an unruly and very angry customer she stood up to him and yea G I JOE came after it was over ;;;;;;;;;;;;;.........dont shop walmart  no more after that .......walmart SUCKS

 

Nov 16, 2012 1:57PM
avatar
Wal Mart can get away with this as long as Americans keeping spending billions of dollars at their stores. We have to boycott and not shop at their stores till they change the way they do business.
Nov 16, 2012 1:56PM
avatar
Where do you begin with "What is wrong with Walmart" - horrible treatment of employees is just one point.  How about their negative advertising (at least in the Chicagoland market) - what they don't tell you is that there is a distinct difference between Walmart stores pricing which they refuse to match.  Location of the Walmart store has everything to do with what they charge.  While one store will charge you $3.49 for a particular item, another store less than 5 miles away will charge $3.99 giving you the excuse that it all has to do with delivery location.  This is probably the reason why there is no weekly sales flyer (like Target & Jewel/Osco provide) because each store charges something different. 
avatar
What is wrong with Wally World.  Chineese made junk on the shelves, high school kids for employees.  Haven't been there in years, and  I will never go back.
Nov 16, 2012 1:52PM
avatar
walmart and the decline of America, American values, and small town America: perfect together.

want another opinion? their stores have body odor.


Nov 16, 2012 1:45PM
avatar
most of the people who shop there are welfare people
Nov 16, 2012 1:42PM
avatar
I am a small retailer, and have always taken great pleasure in the fact that on the majority of my inventory, I can not only offer product at better prices, but it is also a higher quality product.  Small communities are tired of Walmart and mom and pops are springing up not only in the large communities but making a resurgance in the small rural communities and I'm loving it.  I look forward to the time when box stores are a thing of the past and the chinese are kissing our backside instead of us kissing theirs.
Nov 16, 2012 1:42PM
avatar

 

walmart has gotten to be ajoke when shopping.  The stores never care the same products, you find something that you like buy it and go back a week later and it is never there.  Keeping the store stocked is a problem..Why doesn't the American buying public just quit going to walmart.   Everything they sell comes from China or some other country.  They should demand American products..I can remember when Walmart was proud to carry American made products.  You saw the American flag all over the store.

Nov 16, 2012 1:41PM
avatar

Between Wal-Mart's employee  pay scale and benefits package, many of its employees, especially those with small children, are eligible for food stamps, WIC, Section 8 Housing vouchers and Medicaid.   America's taxpayers are paying Wal-Mart's operating expenses!  Our laws let them do this and our congress lets this bs continue! 

 

The bounty is being shared by Wal-Mart's stockholders, senior management and various Chinese manufacturers. Don't think so?  Here:    and 

 

For more, just Google "Wal-Mart employee salaries"  and "Wal-Mart benefits" (no quotes).

Nov 16, 2012 1:41PM
avatar
Walmart provides enough low prices that most shoppers realize they deal with the crowds and cheap fixtures and you will save a ton of money. Wow the person that said 80% of Walmart employees are on food stamps, really... if thats  the case so is every other retail worker, they pay the same !. Get a grip Walmart bashers they are here to stay if you don't like them dont shop there it's as simple as that. It's obvious a lot of people do.
Nov 16, 2012 1:37PM
avatar

I WILL TELL YOU. They pay minimum wage to desperate people who in turn have terrible attitudes because they are broke. Their employees have bad service because they are hurting financially and they treat customers poorly.

They make crap that is manufactured in others countries ... they ship jobs away bad bleed our country dry...

That’s what is wrong

Nov 16, 2012 1:36PM
avatar
first if you visit you have to be a big fat ni$$er or a big fat redneck with most of your **** hanging out, cut your sleeves off first and you need to be 3, 4 hundred pounds to get the automatic doors to work. If you do not buy with food stamps the person who is ringing you will not know what to do and how, like whats american express and whats cash money duh.
Nov 16, 2012 1:31PM
avatar
I would not go to a walmart is their chinese junk was free
avatar
NOTHING IS WRONG WITH WAL-MART! GET OVER IT AND GO SOMEWHERE ELSE TO SHOP IF YOU DON'T LIKE IT.
Nov 16, 2012 1:29PM
avatar
Gotta love WalMart. They came in and drove all the mom and pop stores out of business. Then they drove all the KMarts out of business. The American consumer is partly to blame. We have to have the cheapest prices and the best quality. Walmart provides the cheapest prices while beating the companies that sell them products up to get the cheapest prices. They will even make the suppliers to develop smaller sizes of the supplier's products to reflect cheaper shelf prices. Walmart then turns their eye to the labor cost to help lower the total cost of goods sold. Part time workers who don't get  the full benefits of a full time worker. Now that they have to go outside of this country and build Walmart's business in countries where bribes are a way of life, ie. Mexico. There has to be payolas to stay in business, and our government is enforcing our laws. The bottom line is all of our concerns and returns for investments in this country are based on short term timing. Like in the article the sales for this quarter down $1 billion so the stock price could go down. Everything in this country today is all about chasing the buck or somebody figuring out a way to separate you from your bucks.
Nov 16, 2012 1:28PM
avatar
Where does one start? Maybe at the store I was in last night, where I tried buying a watch that was in the jewelry case. No sales associate in the department or anywhere else to be seen. Finally tracked one down. She could not ring up the sale (nor could her English be understood, but that's an aside). Together, we went looking for a manager, from the back of the store to the front. Found one! She couldn't ring up the sale either, saying that the computerized register wouldn't let the sale take place. Why? No one knew. No one could help. Left empty handed, Ordered the same watch from Wal-Mart on line a couple hours later, but paid 33% more. Exact same product, 33% more expensive, plus I had to pay for shipping. Who's the idiot here? Me! Along with everyone else who continues to shop at any retailer that can't seem to get anything right...or even make an attempt to do so.
Nov 16, 2012 1:26PM
avatar
It'd probably help if their employees were not ticked off about working Thanksgiving Day....Black Friday should remain Black Friday....
Nov 16, 2012 1:25PM
avatar

Greed. Ceo's and Board member's ridiculous high pay, People that run the stores can't figure out that they need to restock merchandise and food and have brains enough to know when they sell out items fast they need to order more of that item. Customer service is totally gone! Why should we pay for Chinese junk and make these that care for their own pocket book. Gosh if they made less than they did (ceo's) where would they pay for them lap dances? 

Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

116
116 rated 1
265
265 rated 2
429
429 rated 3
612
612 rated 4
499
499 rated 5
525
525 rated 6
701
701 rated 7
533
533 rated 8
337
337 rated 9
131
131 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
UPLULTRA PETROLEUM Corp10
COPCONOCOPHILLIPS9
TAT&T Inc9
DVNDEVON ENERGY CORPORATION9
EOGEOG RESOURCES Inc9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.