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
avatar
You people are amazing.  You are going to find these same problems in any company on this earth, unless it is your own.  I work for Wal-mart.  I do not consider myself to be stupid or rude, or any of the other things many of you have stated that Wal-mart workers are.  You will find rude, unfriendly, and unhelpful people in every retail store.  I have been to Target about 6 times in my whole life and I have left thier store every time frustrated at the way I was treated.  But I don't blame that on the company, I blame the individual that made me feel that way.  Sure there are thing about Wal-mart that I don't like, but I live in a small town and there is not many places that pay anybetter than Wal-mart.  If they are so bad, then why do they have such a large workforce???  The store I work at is a very well run store.  The people who work there take pride in the way our store looks.  Is there always enough help in the store, no, but I have been in K-mart and had to wait in line because they had one register open, I have had to wait at Target, I have had to wait at stores in the Mall.  And as far a the merchandise Wal-mart sells, it is the same merchandise that Target sell, K-mart sells.  I have had to return things I have bought at Target and had a much harder time returning it than I ever do at Wal-mart.  Again, there are things I don't like, sure I wish I was paid more, who doesn't.  I wish I had better insurance, who doesn't.  But the fact is I have a job, I receive fair pay for the job I do, and I do have other very good benefits.  I don't know of many places that do offer insurance for part-time employees.  So all of you who would like to see Wal-mart fail, stop and think of all of the people who you would put out of work.  Would you want all of the Wal-mart workers to wish the company you worked for, the company who made it possible to feed your family, provide your family a place to live, to go out of business, I think not. 
Nov 15, 2012 9:52PM
avatar
Walmart if a prime example of how greed can make people not care about their employees.  All they want is the money and to heck with the workers.  I bet they don't have the same insurance they offer their employees'.  They work the people half to death and then gripe them out if they can't keep up doing a job that would normally take three people to do (ie, unload a truck, stock shelves).  They are a disgusting bunch of greedy SOB'S.  But china loves them--they should that's were most of their stuff comes from.
Nov 15, 2012 9:47PM
avatar
Being a poor man I shop Wally World....Granted a lot of the things there are junk at best, without the super store where I buy food it would be difficult to survive at other stores. I have second hand knowledge of  employee abuse by the Walmart and this is from family that tried to work there. I am outgoing and talk to a lot of the employees and we know each other by sight, several have told me some pretty awful things about management. I had a problem with management myself so I can see how they really act, in other words I can see past the superfluous smile and the condescending action. Until someone else comes along with the same treatment of employees and customers as did Sam Walton there is no serious contender to take the place of Walmart and that really is a shame. The family that runs it now has no idea how to treat other humans.
Nov 15, 2012 9:45PM
avatar

What's wrong with Walmart is that they know people will still shop there no matter how bad the stores are because people in this economy can't afford anything else.


They slash employee hours every schedule until there is hardly anyone left to help customers, clean and organize merchandise, stock shelves, and keep inventory ordered. If you wonder why the place is a dump, things are constantly out of stock, and no one's around to help, it's because Walmart knows they can cut payroll and still get people to shop there. It's this idea that the customer's backs are against the wall so they don't need to work for their patronage anymore. And you know what- they will continue to do it until people can once again afford to shop at Walmart's better-run competitors. So be sure to thank Walmart for treating you like crap by shopping somewhere else once you're able to.

avatar
I fixed the check out problem. This is how! Fill the buggy with cheeses, milk, ice cream etc. Go to check out and when the line is not fast enough. Leave the buggy and the store. Let wal mart put the items back in stock. If 20 people in every store would do that this would stop. Bermashave
Nov 15, 2012 9:43PM
avatar

I think a greeter at the fron of the store who knows the location of everything in the store would be a big access to any new customer or one who wants to drop in make a purchase and get out in less time.

 

Harry Pickle

Nov 15, 2012 9:43PM
avatar
Wal-Mart typically has the lowest prices, when you have a low budget you need to shop for the lowest prices, or need to save up to shop at other stores like Target or KMart.  Wal-Mart has a variety of products with different types of quality.  Their products are made from the U.S., China, and other countries.  You have the choice to buy U.S. made only products.  Most business do well with the original owner, but go downhill when the owner is replaced, unless you get a good replacement, which is not to often.  I have not personally seen how Wal-Mart treats its customers, only see group meeting, but have heard many reports of poor treatment and no health care, because most employees are part-time.
Nov 15, 2012 9:36PM
avatar

The votes have been counted and Wal Mart truly sucks and everyone hates the way they do business; well at least 50% of Americans; mostly the poor Americans and the workers at Wal Mart; that must be why they are still doing relatively well.

Nov 15, 2012 9:29PM
avatar

I do not like to see this type of news about ANY company.  I completely understand the comments and complaints about Wal-Mart stores and I agree with these folks.  I see it in the stores around where I live.

 

I am the Training Coordinator in our local Wal-Mart store.  I work very hard to influence upon our current and new associates that customer service is our #1 priority.  I stress that it is crucial to keep our store clean, well stocked, organized, and friendly.  We want our customers' shopping experience to be Fast, Friendly, and Clean.  I'm proud of our store.  I enjoy walking through the doors each day and viewing a store that looks like it takes it's business seriously.  Our hard work is paying off.  We have regular customers who drive past 2 or 3 Wal-Marts so they can shop in our store.  We take that as a great compliment and it makes us proud.

 

I encounter a lot of negativity about Wal-Mart on a daily basis.  I would be remiss if I failed to tell you that our company has been good to me.  Wal-Mart is the largest private retailer in the world. It should go without saying that, as such, we are constantly working with trial and error. Our company is not perfect.  Changes are being made slowly, but surely.  Do not give up on us.  We are not ready to throw in the towel yet.

 

Rick 

Training Coordinator

Wal-Mart Supercenter # 406

Nov 15, 2012 9:28PM
avatar
Wally world is good to me. On the way to work at 6:30 am it is empty , cleaner and has a huge selection of food and supplies than any other store at a much lower cost. HHMMMMMMM.
Nov 15, 2012 9:26PM
avatar
Wal-Mart in our area has gotten so bad that I only shop there about every 2 months or so. They quit carrying a lot of products that I use and I don't like the selection of products they now offer. The employees are underpaid and are given no respect by the management and, in some cases, the customers don't respect them either. There are 99 cent stores in our area which are better kept than our Wal-Mart. I'll take Winco, Target, Costco, Petsmart, and Lowes over Wal-Mart any day of the week. I heard that Wal-Mart stores in Las Vegas were closing because they couldn't compete with some of these stores like Costco. I agree with uncle Lenny 100 when he said, "I could go on and on but W/M shoppers already know what's wrong, and W/M doesn't care."
Nov 15, 2012 9:25PM
avatar
My daughter is in management in walmart. She is completely brainwashed by corporate management and is crapped on regularly. She has even gone so far as to threaten to call the police if I mention a union in HER walmart. She whines and cries about the way she is treated and then treats the people under her as bad if not worse. walmart employees need to stand up and fight back!
Nov 15, 2012 9:23PM
avatar

Maybe Wal-Mart will learn from this. I recently went to a Wal-Mart strore in Yelm, Washington order a birthday cake for my daughter, it was around 7:30 PM. They told me I could not order a cake because the baker has gone for the night, and come back tomorrow. I was shocked that the nation's #1 retailer could not take my order for a birthday cake at 7:30 PM. I just drove down the street to Safeway to where I was immediatly taken care of. Also always long lines at the checks outs at this particular store with only three cash registers open out of about 40 registers.

Nov 15, 2012 9:22PM
avatar
Their customer service sucks!  Cashiers are rude, don't even say hi or thanks.  I'm doing my Christmas shopping at Target this year.  Cleaner store, friendly people.  I'd rather pay a little more and feel like my business is appreciated!
Nov 15, 2012 9:22PM
avatar

people are finally getting wise to the racist hiring policies and practices at Walmart, and the low quality items that are over priced, and then marked down, as if the customers do not know any different. I would rather go the dollar store where you can get the same merchandise!. I have had nothingbut bad luck with most of my electronic purchases at Walmart

 

Nov 15, 2012 9:21PM
avatar
Show me a target or a sears or any walmart competitor that isn't wall to wall made in china. You whiny bunch of losers. The people that work there can work hard and move up or leave for greener grass. They have a choice. And no one is twisting your arms to shop there , You have a choice  . I'm calling out msn.com as to why they have a hack writing this article that doesn't even shop in walmart and sounds like a paid cheerleader for target and the unions. 
Nov 15, 2012 9:17PM
avatar
jonathan berr, you are an absolute joke man. how come i can look at other articles on msnbc, yahoo, and any other financial website, and show that target missed their "wall street projections" too. YET you say they passed them. get off of targets dick and go by the numbers, not your biased crap you spew out of your mouth like verbal diarhea.
Nov 15, 2012 9:16PM
avatar
i WOULDNT SHOP AT TARGET IF IT WAS THE LAST PLACE ON EARTH ITS OWNED BY THE FRENCH AND  WE ALL KNOW  ABOUT THEM  AS FOR WALMART I PREFER  THE SMALL MOM AND POP STORES FOR  THE QUALITY ITEMS I NEED IF IM JUST NEEDING  A CHEAP ITEM I DONT CARE IF ITS GOING TO LAST ILL BUY WAL-MART
Nov 15, 2012 9:14PM
avatar
Shop at WalMart and support Chinese Communism.
Nov 15, 2012 9:12PM
avatar

This is the nascent future of American blue-collar retailing--an abomination of cheap merchandise, poor service, uninspired employees, large turnover, and dingy atmosphere. Like I imagine the Soviet Union would be, had it survived.

 

Will Wal-Mart? No, they'll keep on bribing, gouging, using and discarding, 'til Target beats them handily several quarters in a row. Then they'll have a big hoopla reorganization and rebranding--like KMart. THEN they'll die, if we're lucky.

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.

115
115 rated 1
269
269 rated 2
445
445 rated 3
614
614 rated 4
684
684 rated 5
678
678 rated 6
608
608 rated 7
454
454 rated 8
310
310 rated 9
138
138 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
AAPLAPPLE Inc10
ARCPAMERICAN REALTY CAPITAL PROPERTIES Inc10
ATVIACTIVISION BLIZZARD Inc10
BIDUBAIDU Inc10
BMYBRISTOL-MYERS SQUIBB CO.10
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.