Wal-Mart Finding it Harder to Expand

Excerpt from our One Page Annotated Wall Street Journal Summary:

Seeking Expansion in Urban Areas, Wal-Mart Stores Gets Cold Shoulder

Summary: Last year, Wal-Mart (WMT) saw its sales jump 9.5%, but that was lower than the double digit growth rates investors had come to expect from the company. For the same period, its same-store sales growth was 3.4%, down from a record of 9.9% set in 1999. Target (TGT) and Sears (SHLD) shares are now trading at higher price/projected earnings ratios than Wal-Mart. What’s going on? While Wal-Mart has had some success overseas, domestic sales still constitute 78% of total revenue and it is having a harder time growing the domestic end. WMT faces some human obstacles: when it wanted to open a store in Boston, Mayor Thomas Merino joined local opposition, saying “Wal-Mart does not suit the clientele we have in the city of Boston …They don't pay wages that are sufficient. Their benefit structure is poor. I don't need employers like that in our city.” This, despite Mayor Merino actively wooing Target, which he feels has a better image. Other cities where Wal-Mart has lost similar battles are Leominster Massachusetts, Miami, Inglewood CA, and the New York City boroughs of Queens and Staten Island. It’s not just new store expansion that is giving Wal-Mart headaches. Last year Wal-Mart applied to open an Industrial Loan Corporation (“ILC”) in Utah. Despite promises that they would not use the ILC to open branch banks in Wal-Mart stores (the ILC would be mainly used to process Wal-Mart’s credit card transactions), the FDIC imposed a six month freeze on new applications following a wave of protests. Full WSJ article >
Related links: Wal-Mart's Prescription Drug Plan Could Impact Entire U.S. Health Care System • Discount Retailer Operating Income Growth • Wal-Mart Hits High End of Forecast - Is That Good Enough? • Wal-Mart on the Runway • BusinessWeek: Wal-Mart and Apple Battle for Turf
Conference call transcripts: Wal-Mart's Q2 Earnings Conference Call Transcript

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