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Wal-Mart Stores (NYSE:WMT) reported its fiscal first quarter earnings earlier last week and as expected it was lackluster (see conference call transcript). It was a joke that the biggest retailer in the world could not even hold a live conference call. It was a recorded message from the CEO explaining how unsatisfied he is with results and more importantly, forward outlook. What a shame. To not hold a call for analysts and shareholders is a disgrace and a testament to the condition that Wal-Mart is currently in.

How many times have I heard or read that Wal-Mart's stores are tired, dirty, disorganized and just a general mess. Yes, the company is trying to re-build its image -- not quick enough for shareholders -- by cleaning up its stores and even trying new lighting patterns. But Wal-Mart is perpetually tagged with every employers worst nightmare: disgruntled and uninspired workers. Ever met a really happy Wal-Mart employee? Maybe, but it is rare.

Wal-Mart is so big that it is stuck in the molasses of trying to figure out which way to turn before trying to climb out. The market capitalization is $200 billion with revenues approaching $400 billion. How do you grow from here? What's going to inspire a new generation of shareholders to want to buy and hold this stock? Wal-Mart must be owned by S&P 500 index funds as it ranks in the top 10 in terms of market capitalization. Bigger question is why would non-index fund shareholders want to hold onto their shares? Wal-Mart needs help, big time help.

Maybe try a little bit of McDonald's (NYSE:MCD) magic and new business approach.

McDonald's is a lot like Wal-Mart on the surface. Both are the dominant leaders in terms of units and revenues, making it tough to grow with new units as cannibalization of existing units could occur, thus defeating the purpose of new stores. So the only way to grow effectively is to maximize the current base with higher sales and a sense of freshness to the same old store.

Look at what McDonald's has tried and succeeded with recently. New salad entrees to appeal to the health-conscious customer. A variety of salads well presented and certainly fresh tasting. Sure McDonald's is still perceived as a burger-and-fries joint, so why not enhance that aspect of the menu with the new Angus burger, a higher quality meat. McDonald's has started to offer various low-carb wraps to appeal to the waist watchers and a far better cup of coffee than previously offered. It even offers an iced-coffee to capture customers looking for variety on hot summer days. McDonald's will not be Starbucks (NASDAQ:SBUX) when it comes to variety, but it is no longer just serving up hot, dark-colored water either. In other words, McDonald's now has something for nearly every taste preference.

McDonald's has been maximizing its opportunity to the tune of a new 52-week high on its stock price. Well deserved. Wal-Mart is playing defense and is hiding in the weeds. Today's non-conference call just about summarizes Wal- Mart's position: going nowhere fast. I even heard one analyst say on television that "investors might want to start nibbling away at the stock--but be prepared to hold for the next five years." That's a recommendation to sell the stock to me. It was a lame attempt to try and support a struggling, no-direction based company. The analyst, by the way, looked very uncomfortable -- as if she really did not believe what she was saying. I know I didn't believe her!

Why would an investor want to "nibble" at a loser? If an investor wants "retail sector" exposure, Target (NYSE:TGT) and Costco (NASDAQ:COST) will probably double in value over the next five years while Wal-Mart shareholders are still nibbling!!

WMT/TGT/COST 1-yr comparison chart


Disclosure: none

Source: Wal-Mart's Earnings Disgrace: Time to Follow McDonald's Example

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