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Hilary Kramer ( submits: WMT) is still going strong, but it is too big at this point to have any significant upside, in my opinion.

I probably don’t need to introduce you to the company -- it is hard to live in this day and age and not have set foot in one of their 5,000 stores around the globe, including Wal-Mart discount stores, Neighborhood Markets, Sam's Clubs, and Wal-Mart Supercenters. As I write this entry, I am sitting in a pair of semi-stylish shorts I bought at Wal-Mart.

Point being, while growth remains strong now, what more will Wal-Mart be able to do down the line? With plans to add 550-600 new stores in 2006 and blueprints for ways to drive sales by offering higher-end items to appeal to occasional customers (who come to buy staples like toilet paper), Wal-Mart is looking for ways to keep growing.

I’m not convinced they are going to make a big enough dent. They are pushing into urban markets, trying to fight local resistance by giving free classes to small business owners on how these small businesses can stay competitive with them. (Sounds ironic, ha? I think offering the classes is simply an attempt at good PR. When Wal-Mart moves to town, it is nearly impossible for the Ma and Pa stores to remain “competitive.”) I expect Wal-Mart will continue to face resistance in these new markets. They are also expanding abroad; this may prove more fruitful, though they recently pulled out of Germany and had to agree to unionization in China. Hey, but what do you expect when the head of your German division doesn't even speak German?! No wonder they failed over there in Deutschland.

It is also hard to imagine how they could drive operating expenses any lower to improve on net margins. They already pay rock bottom wages (which may come to bite them as unions find a way to start mobilizing employees); their stores are dirty; their plastic bags are cheap and my Wal-Mart tea kettle leaks. And it is tough to imagine how this less than pleasant shopping environment will draw in the higher-end consumer they are hoping to capture to drive growth.

It may be offering organic produce, but Wal-Mart has a ways to go before it is Target -- and it also needs to be careful not to alienate its core customer either. To add to these hurdles: Higher energy costs and rising interest rates are going to increasingly hurt lower income consumers, and Wal-Mart’s weak growth same-stores sales (at 2.4%) in July may be a reflection of this.

Type of stock:
The largest retailer in the world, I think Wal-Mart has reached a size where their strong growth is going to slow over the next years. They are now heading down the slope of maturity.

Price target: Trading at $44 right now, this is on the low side of where this stock has been in the last year (the 52-week high is $50.87). If you must have Wal-Mart, I’d imagine you might see some gain into the mid-$50s over time. But long term growth won’t knock your socks off. There are better picks out there.

Source: Decline and Fall of the Wal-Mart Empire?