# Is wmt dead money?



## donald (Apr 18, 2011)

Do you think walmart is a dead stock?Ive been taking a look @ the sector and walmart seems mixed,i guess from a dividend stand point they are ok,they perform ok in a bad economy.

Costco seems like the best play,i personally like costco as a consumer,costco is on the high side(share price) then there is super vaul,target,whole foods,safeway to name a few others but anyways what do you think of walmart from both stand points as a consumer and as a shareholder?

I have never grocery shopped there but have bought there "cheap" clothes "joe"It can be a people watching place to be sure lol all kinds @ wally world.


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## andrewf (Mar 1, 2010)

Joe is Loblaws apparel brand. George is Wal-Marts.

What you're seeing with Wal-Mart is the transition from a growth stock to a fairly stable business, with P/E multiple contraction associated with it. When you have $400 billion in sales, it is hard to move the top line much, and it takes a lot of effort to defend that share. That said, they seem like pretty good operators. No comment on which you should buy. Stock picking is a mug's game.


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## KaeJS (Sep 28, 2010)

It's not something I would buy.

The stock itself just doesn't look that promising and the dividends aren't that great at all.


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## gibor365 (Apr 1, 2011)

KaeJS said:


> It's not something I would buy.
> 
> The stock itself just doesn't look that promising and the dividends aren't that great at all.


I'd prefer Target or Lowe over WMT


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## donald (Apr 18, 2011)

Ya there beta is low and the 52 week range is the smallest gap among sector.
The public seems to "hate" the company,especially after the movie on there impact on society(i dont think there image has recovered)and that was years ago.

They also still pay peanuts to there front line workers($8 hr)and walmart is pushing the "pay your self no cashier'' scanning,they do have a growth plan.

I think the company lost and treaded down after walton died.ps i swear i bought joe products there but i could be wrong.


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## ddkay (Nov 20, 2010)

If you want a Canadian/US derivative on Walmart you can try a commercial value-oriented retail REIT like CWT.UN, they almost always use Walmart as their anchor brand, it's a buy as long as suburbs don't go out of style and you believe Canadian consumers won't get crushed (main reason I'm not touching it)


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## KaeJS (Sep 28, 2010)

suburbs won't go out of style, but the CAD consumer will get crushed, sooner or later.


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## donald (Apr 18, 2011)

ddkay,if you foresee the consumer getting crushed wouldnt that be even more reason to want walmart?The are a bad economy stock?They offer the cheapest products across the line pretty much excluding dollar stores.

People still need shampoo,toothpaste,coke,hersey bars,milk,clothes ect ect.
Walmart is a hedge for a downturn because of there price points.

It seems like costco would hurt more.


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## Oldroe (Sep 18, 2009)

85% of the employees can't pay rent. And 5 are multiple billionaires.

Wal Mart will always remain a bad company in my book.


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## rassmy (May 7, 2010)

I agree with Donal, consumers need to buy toothpaste, shampoo,etc. However i would buy the guys who make this products like Unilever or protect&gamble not the guy who sells these product. If you look at the chart wallmart is not going anywhere i would not buying it.


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## Jungle (Feb 17, 2010)

Revenue is down for the last 9 quarters. They are doing a special Christmas price matching policy in the US now. If you find a lower price from now until Christmas, Walmart will give you the difference back.


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## Homerhomer (Oct 18, 2010)

I have no interest in this company for many of the reasons already mentioned, I also think that unlike MCD, KO and few others they don't have the icon status outside of North America, and even here the competition is cut throat. 

We shop for groceries in regular supermarkets, that's where we get tooth paste and stuff like this, add to it dollar stores, regular clothing stores and online shopping, and I think Walmart is in for a tough battle.

Teenages don't shop at Walmart either.

Shares of dollar stores have been on fire, and for a good reason.

Can't remember the last time I went to Walmart.


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## andrewf (Mar 1, 2010)

Oldroe said:


> 85% of the employees can't pay rent. And 5 are multiple billionaires.
> 
> Wal Mart will always remain a bad company in my book.


That's probably true of any large retailer.


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## Banalanal (Mar 28, 2011)

WMT is one of my larger holdings. It has lots of room to expand. It has an economic moat due to its scale advantages. It is something many people take for granted and find necessary. It is not really cyclical. Its earnings have been increasing nicely over the years and the stock has not reflected that given a high valuation over the years. If you buy based on a dividend growth model, it is a premier stock. Also, it's out of favour. A company with all these attributes that is out of favour with the investment community at large always appeals to me. Long term buy and hold for me.


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## HaroldCrump (Jun 10, 2009)

What would be the impact of an appreciating Yuan on WMT?
Not saying it's going to happen - but what would be the impact?
Isn't a lot of WMT's bottom line predicated on a strong USD and a weak Yuan?


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## andrewf (Mar 1, 2010)

Retailers are a lot like utilities. Think of it as a pipeline for junk. They actually like moderate inflation as it grows the pie they take their operating margin from. A rising yuan just means that more of the cheap junk sold at Wal-Mart will be made domestically or in other developing countries. A lot of apparel making has already moved to lower wage jurisdictions like Vietnam, Bangladesh or Cambodia. Next stop, Africa. Less labour intensive goods that have high transportation costs (bulky snap-together plastic items, for example) will be made more and more in North America--likely Mexico.


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## andrewf (Mar 1, 2010)

To be more clear: Wal-mart would be hurt by a rising yuan mostly to the extent you believe that their Chinese sourcing is a source of competitive advantage/differentiation for them. I'm not sure that's the case. All the major retailers source extensively from China. Maybe Wal-Mart does it slightly better.


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## HaroldCrump (Jun 10, 2009)

andrewf said:


> A lot of apparel making has already moved to lower wage jurisdictions like Vietnam, Bangladesh or Cambodia. Next stop, Africa.


The unique thing about China vis-a-vis those other upstarts (esp. Africa) is that the manufacturing base and infrastructure has already been set up and is already highly optimized for this kind of economic output.
The communist govt. "invested" in all that decades ago.
The other low-cost Asian countries aren't doing that.
Africa is not even close...they first need to solve their political, hunger and stability issues before they can even think about setting up a manufacturing base.

My guess is that if more and more manufacturing moves back onshore, WMT might lose some (a lot?) of its competitive advantage.

On the other hand, there can be more consolidation i.e. WMT buying up the 2nd tier competitors.
After Target acquired Zellers, WMT can try and buy up (I dunno) Home Hardware, Loews, whatever.
In the US, they can try and buy out Value Village, etc.


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## andrewf (Mar 1, 2010)

China is not interested in apparel. It is very low value-added. They want to make telecom equipment, not underwear.

And actual apparel/garment manufacture is pretty low capital required. Textiles are still being produced in large quantities in China as it can be highly mechanized. Sowing together into garments usually moves to the lowest wage jurisdiction.


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## andrewf (Mar 1, 2010)

I think Walmart's growth plan currently consists of conquering emerging markets like China, India, sub-Saharan Africa, Mexico, etc. and attacking the C-store/discount grocer/dollar store segments in the US. The market is saturated with big boxes, but there is potential for incremental revenue with smaller stores in urban areas where it is prohibitive/prohibited to build 160k sqft stores and rural areas/small towns too small to support that footprint.


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## HaroldCrump (Jun 10, 2009)

Right, and the majority of electronics that WMT sells is all made in China.
Telephones, TVs, CD players, etc.

We are, of course, talking at a macro level.
I see limits to how much more Wal-Mart can optimize at the micro level to impact their bottom line.

They are already the cheapest retailer.
They already pay the lowest wages (barely minimum wage).
They have a pretty bad employment record.
They already have highly optimized supply chains, etc.

This stock has done nothing for nearly 10 years, except for the 2.5% dividend (which has been raised several times and is still a low payout ratio, to their credit).
I guess my doubt is the upside for the stock itself.

The stock is so closely tied to macro-economic factors such as overall GDP growth, currency exchange rates, etc. - each of which is stacked against them at the moment.


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## andrewf (Mar 1, 2010)

^ A lot of that is just perception and not reality. For instance, Wal-Mart is frequently not the lowest priced retailer. They are a generalist. For instance, discount grocers tend to be a point or so cheaper than WMT. Dollar stores are also often cheaper.

Walmart still has plenty it can do to improve its supply chain. It seems to have a carefully cultivated image as having reached supply chain nirvana. It just isn't the case. I happen to know they are investing extensively in their supply chain. Really, no supply chain is ever 'complete'. It needs to evolve to respond to the changing demands of the marketplace.


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## HaroldCrump (Jun 10, 2009)

andrewf said:


> Walmart still has plenty it can do to improve its supply chain. It seems to have a carefully cultivated image as having reached supply chain nirvana. It just isn't the case. I happen to know they are investing extensively in their supply chain. Really, no supply chain is ever 'complete'. It needs to evolve to respond to the changing demands of the marketplace.


Yes, of course. Those are business dynamics that every company needs to respond to.
Looking at the chart, I don't see anything attractive at all.
Unless someone bought during the 2001 lows, or during a dip in 2005, you haven't made anything on this stock in 10 years (other than the dividend).
Stock is actually at same level as 2009 lows.
It appears that inspite of its foray into the emerging markets, the stock is in fact under-performing even the US real GDP growth rate.

Purely from the perspective of the OP's question - I don't think WMT is "dead" money because they aren't going out of business anytime soon, but it isn't looking promising for growth either.
Compare its story with MCD, which was considered similar in terms of its North-American exposure and see how they have done in the same 10 years (or any 5 year period).


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