Don’t Buy Walmart

In 2017, “Bloomberg reports Walmart’s top suppliers’ OTIF scores were as low as 10%.”

This has been going on for a year now, but these are the ins and outs of how Walmart is squeezing out cost from every corner which Wall Street does not understand.

Wholefoods Isn’t Taking Over the World

It’s also been a little over a year since Amazon decided to buy Wholefoods, and we haven’t seen Amazon take over the retail space like many feared.

While Amazon has access to a lot of offline data and shopping patterns through the Wholefoods stores, there has yet to be a game-changing shift with the acquisition.

How will it affect Walmart?

Not much.

I’m most likely drinking too much kool-aid, but I don’t see any retailer taking over Walmart any time soon. In the supply chain example above, Walmart is best of breed.

If Amazon is the next best matchup, they have a lot of ground to cover before they make any serious dent to Walmart.

Should I Buy, Hold or Sell Walmart?

Walmart hasn’t been a great investment this year.

(Click on image to enlarge)

It’s -1.9% on the year vs Amazon’s return of 60.3% and the S&P of 8%. As the stock price comparison will surely come up, let’s get that out of the way.

Walmart dropped this year due to concerns of slowing growth. Analysts wanted to see faster growth in the ecommerce segment and make 30+% growth the norm.

While Walmart is certainly investing heavily into expanding online sales, their main driver still comes through brick and mortar with a 4.5% increase in SSS comps. You may not go to Walmart at all, but the numbers show that a huge population does and their earnings release prove it.

But Walmart is not cheap anymore.

Frankly, I don’t believe that any investor has an edge with Walmart. The only edge you can get with a big company like Walmart is by knowing what price you should buy or sell.

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Disclosure: Long WMT.

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Mike Nolan 3 years ago Member's comment

Thank you for this insight into being a seller on Walmart, as this was an area I was not familiar. But I can tell you that as a customer, Walmart is ages behind Amazon and other competitors.

Why can I get an item from Amazon in 1 to days, but on it can take a week or more? Why if I want to do an instore pickup, do they waste time and money to ship the item my local Walmart, when I know for a fact it's in the store already? That makes no sense.

Compare this with BestBuy. I place an order online. Within 30 minutes I'm told I can go pick it up. In under 3 minutes I am in and out of the store. I placed a similar order at Walmart. It took a week to arrive (even though it was also sold in store). Then it took an hour and half to pick it up. Why? There was no one manning the pick up counter. Even after having customer service announce over the PA system for someone multuple times, no one showed up. When someone finally did, the person didn't know how to process it. When someone finally arrived who could, they went to the warehouse for a very very long time. When I asked why, she said they had to manually scan with her eyes for my name on every box till she found it. That there was no rhyme or reason to how it was scanned. When the item was finally handed to me, the box was badly damaged as was the item inside.

This is anything but efficient! Bullish on $AMZN and $BBY, Bearish on $WMT.

Angry Old Lady 3 years ago Member's comment

Don't you mean you see how much money WALMART is leaking compared to the efficiency of Amazon? You wrote it the other way around.

Dick Kaplan 3 years ago Member's comment

No, he meant what he wrote. I too did a doubletake as I though Amazon was the king of efficiency, while as James son eloquentlg put it, I always though Walmart was a "mess."

James Hunter 3 years ago Member's comment

#Walmart is, and always has been, a mess.