During the third quarter of the year, Wal-Mart's stock went from $48.91 to $49.32, or 1.1%. In an unusual show of solidarity with WMT's investors, same-store sales rose only 1.8% in September. The company's customers must have called its investors on the phone.
Wal-Mart Stores, Inc. (NYSE:WMT) had all kinds of reasons why its store sales were not more robust. Comparisons with Katrina-related events were at the top of the list. But, the company had said that same-store figures would be up as much as 3%, so the news was not good.
The unavoidable truth for Wal-Mart is that sales in the US are, if the months are evened out, slowing sharply. The company is just too big with too many stores. The easy share is not longer there for the taking.
As investors combine the news in the US with the sale of Wal-Mart units in South Korea and Germany, the evidence is mounting that China has become an absolutely critical part of the company's ability to grow.
Wal-Mart's expansion in China is not without problems, especially as local unions become involved. Because these labor organizations are controlled by the government, it is still impossible to say whether the Chinese bureaucracy will want a role in the operation of Wal-Mart stores in the country.
With growth in the US only matching the rate of inflation and Wal-Mart abandoning some key markets, the options for the company to return to rapid top-line growth become fewer and fewer.
Douglas McIntyre is a partner at 24/7 Wall St.
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Reader Comments (Page 1 of 1)
10-02-2006 @ 1:25PM
Gary E. Sattler said...
No news to add to this one!
But what's this...
Compare the DJIA to what's happening in our little stock neighborhood.
Could it be that the investors are finally reading US and not just the headlines?
Me thinks me sees good things on the horizon.
Smiles everyone, smiles!
Welcome to Fantasy Island!
10-03-2006 @ 6:35AM
Mike said...
Same store sales is not the WMT internal metric, market share is the metric!
Example – Would it be preferable to have two stores at $100M sales or three stores at $80M sales?
WMT prefers the latter, which supports their market share strategy, but negatively impacts same-stores sales.
WMT projects they can add 4,000 Superstores over next 10-15 years, which would directly affect same-store sales, since some portion of that 4,000 would come from closing or upgrading discount stores.
10-04-2006 @ 4:03AM
David porter said...
Walmart needs to wake up there company is big enought they are going to get there self in trouble people see that thats why the stock has done nothing I see a crash in Walmarts future if they don,t get a clue.