Why this NEW Raw Footage Should Worry All Wal-Mart Investors

New. Raw. Disturbing.

All of the financial-related thoughts and facts that I originally shared on Wal-Mart’s internal mismanagement could be found here.  The new, exclusive footage below, shot post-Christmas, reinforces these three messages:

  1. Wal-Mart’s in the trenches, store-level workers are not emotionally invested in making the company produce financial results above the expectations of store managers and ultimately, headquarters.
  2. Wal-Mart’s executives that appear on the corporate website remain disconnected with the economic realities facing their $35,000 a year pre-tax income core customer (and less if employed at Wal-Mart…), as seen in the over-ordering of merchandise.  According to a fall poll conducted by Gallup, 20% of U.S. individuals stated problems with having enough money to buy food for themselves and family.  Note this poll was taken before the vaporization of emergency unemployment benefits.  Step away from the keyboard, put down the iPhone 5s, and think for a hot second on the disturbing nature of those last two sentences.
  3. Wal-Mart has grown too, too large to operate efficiently.  It’s time to retire the tired saying on the Street that “Wal-Mart is the king of efficiency.”  The company needs to be globally restructured (and this has been acknowledged via international store closures in 2013), including the closing of U.S. and international stores, to restore a high level of operating efficiency that will be required to drive profit margin expansion in an expanding mobile consumption universe.  Remember this: Wal-Mart’s U.S. same-store sales, or sales from stores opened longer than a year, have been negative in each quarter of 2013, so it’s imperative to find new efficiencies, and that is done through restructuring the business.

Reiteration

I expect Wal-Mart to disappoint the forever bullish Street (once again, as Wal-Mart has issued two full year earnings warnings this year) with its initial 2014 earnings per share outlook, and for the stock to underperform peers and the major indices next year.  To avoid that underperformance, Wal-Mart will have to unveil a positive catalyst, and to me that comes in the form of a restructuring plan announced by the newly minted CEO.

The Footage You Need to See

You may be wondering: “why is this not normal, what is he seeing here?”  Allow me to hop into your brain.  The footage below was taken in an outdoor center at a Wal-Mart, not a traditional stockroom.  The read: the company has stuffed its designated stockrooms too much with slow-moving inventory, for example large screen TVs, that a bit of creativity had to be tapped to store more truckloads of merchandise.  Put all of this together and you get one read: higher than appreciated by the Street forward margin risk.

photo 5 photo 4 photo 3 photo 2 photo 1When Wal-Mart moms are sticking to budgets that means: (1) fill-in visits to the store for the essentials that also spur non-discretionary purchases are not made; (2) carefully utilizing seasonal goods in season so as to not have to spend money on them in the following year.

 

Belus CA - LOGO

We know you're overwhelmed by the news and noise on Wall Street. Join our exclusive newsfeed to receive periodic updates, ranging from insights from our talks with executives to must know, real-time market stats. Sign up here!

 

IMG_8438-edited

 

Looking for more in depth investment research?

For only $15, become a client of our Rumor Mill service and receive actionable daily updates from the Belus Capital Advisors research team's work as well as our investing strategy guide, How to Be a Market Master.