Friday, June 3, 2011

Ruh Roh (Again)

So, a whole bunch of interesting news came out yesterday and today about Walmart.

First off at MSNBC, Walmart is struggling to keep its customers.

The company has taken nine months to restore thousands of grocery items, including some bestselling brands, it dumped from its shelves two years ago. The idea was to tidy up stores for the wealthier customers it had won during the recession. 

Grocery sales have improved, rising in the low single digits in the first quarter. But overall traffic at its U.S namesake stores has been down and revenue at stores open at least a year has posted eight straight quarters of declines on a year-over-year basis.

Thats a whole lot of bad news in its own right. To counter, they've been promoting the opening of smaller stores, which is beginning to take front and center attention now:

To address the increasing threat of dollar stores, Wal-Mart will open the first of up to 20 Walmart Express stores planned for this year. These stores are a tenth the size of a supercenter, or about the size of a typical drug store. Wall Street analysts and the media are expected to get a first look at a Walmart Express store Thursday. The store, in Gentry, Ark., will open later in June.

But this all seems contrary to the pep rally, err, shareholders meeting held today ... 

"We made a lot of progress over the last 11 months," said Bill Simon, president and CEO of Wal-Mart's U.S. business in an address to shareholders. "We have the right plan."

So why change it then? If the SuperCenter method is working for you (it isn't), then why focus on smaller stores? Why are you testing new ways to bring in big revenue (appliances)? 

I get that companies have to grow, but cmon now ... You can't tell shareholders that you have the right plan after posting 8 straight quarters of losses.

They're also trying to 'Win' in the Online Market ... 

“Wal-Mart CEO Mike Duke appears to be setting the company up for a run at Amazon in his comments at the Wal-Mart annual meeting today.
“Wal-Mart ‘will not just be competing’ in global ecommerce, Duke says. ‘We will play to win.’
“Wal-Mart has been making purchases and growing internally to build up its online operation, which is in synch with its brick-and-mortar stores through programs like online ordering with pick-up in stores.”

Hey, online ordering, and in store pickup? Gee Golly, what a great idea. Welcome to 2005 Mr. Duke.

Here's what it boils down to ... Walmart, like lots of US Business', has had a rough go of it in the past couple of years. Problem is, they've pushed so many people around for so long that the competition smells blood in the water, and rightly so (See Venture, Zayre's, Kmart), and And a lot of it has to do with situations very similar to this one right here.  Hugely expensive Supercenters that are not profitable, and in a lot of cases, not popular. Why on earth do they need 3 Supercenters within a 5 mile radius of one another? They don't. But its the bullheaded thinking of WM's management that has gotten them into messes like this in the first place.

Perhaps the Walton family themselves are beginning to agree ...

Walmart has tried several initiatives to turn around its domestic operations. All have failed. The latest plan is to open smaller Walmart Express outlets. These locations will be about 10% the size of normal Walmart stores, and will stock primarily food and general merchandise. At the same time, Walmart's Sam's Club unit will begin to offer more groceries.

If this new plan doesn't work, pressure will increase for the board to consider removing CEO Michael Duke (pictured). The success of his tenure has been questioned before, but the board's role is not often discussed. 

Walmart's board didn't have any trouble ousting former CEO Lee Scott, who served from 2000 to 2009. His record on labor and the environment was criticized for years. The Waltons may decide that it is time to find a replacement for Duke to see if a new candidate can turn U.S. retail operations around.

Time will tell folks.

No comments:

Post a Comment