Wal-Mart (WMT) is an enigma.
On the one hand they're a leading edge retailer, with logistics second to none. On the other hand they've moved from being a destroyer of small towns to a labor pariah, a company that glories in its practice of conservative politics.
What unites all this is that Wal-Mart is a company that wishes it were not in such a labor-intensive industry. The company sees workers as a cost, not a value generator, and anything it can do to automate the business is of interest to it.
But what's the difference between that and, say Amazon (AMZN)?
Not much, and if you play WMT stock against AMZN an interesting pattern develops. While over the last decade, or even the last half-decade, AMZN has been by far the better investment. This has begun to change. Over the last year WMT is up 27%, against a gain of 22% for AMZN. Over the last three months the WMT gain of 9% is almost double that of AMZN, 4.83%. In just the last month AMZN is actually down a little while WMT has gained almost 4% in price.
And clearly, Wal-Mart management has an Amazon complex. Why else put lockers into stores so shoppers can grab their online purchases and skip the picking and the register? "We're tenacious about building the best in class e-commerce," says Neil Ashe, who heads the effort. Amazon on the mind much?
But you have to ask how much this effort adds to revenues. A shopper on a smartphone matches their shopping list to Wal-Mart's offerings, they click buy and Wal-Mart employees are supposed to have the orders ready for them, pre-paid, when they come in the door. Sounds great, but does that mean more shoppers coming to Wal-Mart who wouldn't be coming otherwise?
And what does that do to head count? Bloomberg reports the company doesn't have enough people on-hand to stock its shelves now, let alone unstock them. It's hard to spin numbers, and while Wal-Mart's store count is up 13% over the last five years its headcount is actually down 1.4%.
What should this tell investors? Consider that Wal-Mart sent out word of its e-commerce success just as it acknowledged that it will suffer "financial losses" over charges it bribed its way into Mexico.
Amazon breaks bulk in an automated way by doing it in warehouses, where it can maximize the use of robots, and minimize the cost of labor. You can't do that efficiently in a store, robots would get in the way.
All of which tells me that the stock is headed down, at least in the short run, and that Wal-Mart management needs to figure out how it's going to continue to break bulk without people, before its Red State attitude gets in the way of any Blue State success.