I have
to admit, when a firm represents almost 10% of all retail in the US, there is
going to be a major spot light on every move the firm makes. Frankly, I need to
take the Vito Corleone approach when following Wal-Mart Stores Inc. (NYSE:
WMT)
meaning "I cannot judge what someone does for a living" as the Don would say,
even if it seems predatory.
This week (WMT)
announced that they are predicting that the 2009 holiday season would come late
and it would progressively add discounts. It read to me like everyone should
wait to shop until 12/18 and then go into a discount feeding frenzy at Wal-Mart.
Let's face it;
Black Friday is a myth in retail, as is Cyber Monday. The real action is back-timed
to the schedule of shopper convenience and how the calendar falls.
Is (WMT) paranoid
that this year will be worse than last year? Is there a dire prediction that gift
givers will wait to pounce only when prices are lowest?
I believe
everyone is cutting back this year. Frugal is the new chic; Target (NYSE: TGT)
is hip and Wal-Mart is practical. I think there is a master plan at work and
that the timing of this announcement, the amount of media coverage and the mood
of the media is all being orchestrated. The media doesn't see unemployment as a
lagging indicator. The media can't wait
for things to play out. The media is almost hoping for a double dip in the
market and a second and maybe third Federal stimulus plan.
This plays
right into the predatory nature of Wal-Mart. Price the competition out of
business. History teaches us this strategy worked in steel, energy, and the
railroads in the early 1900s. Wal-Mart is shrewd enough, strong enough and
poised to price many weaker retailers out of business. Who does vendor
management and pricing better? Who does supply chain management better? Who can
still squeeze out a profit and remain standing at the end of this fight? Only
Target can hold a candle to Wal-Mart on this one.
Now that is
the plan domestically. That is the tip of the iceberg.
This country
is near over-stored. Our population is static to shrinking, is aging and we
have shut down immigration. Not a great growth scenario for the nation's
largest retailer. The next step for growth is already in place. (WMT) is already present
in the most populated country on earth. Posted on 10/23 on People's Daily
Online is Wal-Mart's next move in China.
Wal-Mart, the
world's largest retailer, released an ambitious expansion plan. The company has
planned to open 5 branches in Sichuan in 2010 and to establish a logistics
center in Chengdu within three years. It will be the fourth logistics center
Wal-Mart has established in China.
"We are
willing to invest in western China," said Ou Guoming, senior manager of
Wal-Mart Regional Office, adding that this decision was based on the
significance of the western China market.
In the first
half of 2009, western China witnessed 11.8 percent of GDP growth and 19 percent
retail sales growth.
This article
speaks for itself. Wal-Mart stock was just about tops in 2008 stock performance and so far horrible in 2009.
Many investors and analysts have lost interest; especially after (WMT)
discontinued providing guidance making the game far less interesting in their
eyes. Fact: Wal-Mart continues to deliver quarter after quarter. The question:
will the Street reward the firm and its investors with a fair valuation in
terms of its multiple (P/E)? Wake up Wall Street, I am voting yes by holding our shares.
Disclosure:
Mr. Corn is Chief Investment Officer – Equities of Beacon Trust Company.
Through various equity strategies under his supervision he is currently long (TGT)
