Wal-Mart May Get an Anti-Trust Reprieve, But...

Yesterday Wal-Mart (WMT) reported its earnings, beat by a penny and confused everyone with its convoluted Forex laced guidance for the fourth quarter. (Call Transcript) I have been quite public in expressing my opinion that WMT would be a victim of Obama policies. In particular, I am worried about potential anti-trust efforts to break up WMT as well and the impact of the Employee Free Choice Act.

However, Andrew Ross Sorkin had a very interesting article in Tuesday’s New York Times. In the article he discusses a conversation that he had with David Boies, a prominent attorney who was hired by Washington to “bust up” Microsoft (MSFT) in the 1990s.  Boies is of the opinion that Obama would not take an active antitrust stance in his first two years of office.

I agree. I think that given the state of the economy that Obama is going to be far less socialist in his policies in the early part of his administration. As a result, I am going to back off on my concerns for WMT in the near future. Though WMT will get a reprieve on the antitrust front, I expect that to be short lived. The bigger issue on the labor front could be a more immediate problem for WMT.

Benefiting WMT in the short run will be the continued trading down by consumers of all income levels. Thus, WMT could be a good investment for the first two years of Obama’s presidency but after such time the festering issues I described could begin to surface and turn WMT into a great short.

Disclosure: None 

Comments

[H.J. Huneycutt:]

What information out there suggests that there are any plans by anyone to try to break-up Wal-Mart based on anti-trust concerns? I don't think I've ever heard of a retailer getting hit on anti-trust and Wal-Mart still has considerable competition with Target (on the department store front) and several grocery chains.

I think Wal-Mart is more likely to suffer if gas prices start coming back up. The Wal-Mart business model is based on the assumption of cheap gasoline. If gasoline costs $5/gallon, people start buying from their neighborhood grocery stores (a few miles away) rather than driving 10 miles out to the Wal-Mart Supercenter.

2008 Nov 14 08:02 AM

[Chris H.:]

I would be that anything more Wal-Mart gives to its employees is spent right back in their stores.

2008 Nov 14 10:19 AM

[iggyDalrymple:]

I think that WalMart and Exxon would both be wise to move their domicile offshore. Most of their growth is international.

2008 Nov 14 01:10 PM

[sr9web:]

WMT has no anti-trust problems. Walmrt's risk is that for the unions, WMT is The Great White Whale. Obama might be helpful to unions trying to organize Walmart.

Of course, a unionized Walmart would soon konk out...

2008 Nov 14 05:35 PM