december 8, 2004Get too big and you'll implode? Maybe. Looks like Wal-Mart is getting too big for its ownself. And it also looks like they are getting a bit too cocky for their own good. Here is an interesting article on why Goldman Sachs retail analyst George Strachan cut his rating on Wal-Mart to ''in-line'' from ''outperform."
The key points are:
- Wal-Mart was too cocky and did not lower its prices for the key day-after-Thanksgiving sales bonanza. Wal-Mart admitted "it made a mistake by not discounting goods enough as the holiday shopping season began, and gave its lowest monthly sales forecast in 19 months for December."
- Wal-Mart is just too big for itself. ''We are concerned that Wal-Mart's strategy to position large super-centers closer and closer together may remain an ongoing depressant to (comparison) store sales growth.''
- Wal-Mart is showing small margins. "Two years ago, it regularly reported sales rising about 6 percent a month at its U.S. stores open at least a year -- a key retail gauge known as same-store sales -- but this has slipped to around 2 percent in the second half of 2004." In November the same-store sales was just a mere 0.7 percent.
- The wolves are after the big dog, "The Bentonville, Arkansas-based retailer is facing more competition from other discount stores like Target Corp."
- And because Wal-Mart pushes everyone to lower their cost, especially in groceries, Wal-Mart is reaping the low margins of their efforts as "lower-margin grocery sales is diluting its overall sales growth rate."
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