WMT - Walmart Inc

[Guest longinvestor]

60% of the U.S. population lives within 5 minutes of a Wal-Mart, and 96% lives within 20 miles.  Wal-Mart has a temporary solution for the last mile and instant delivery problems, let the customer come and pick it up.  There are many times two day shipping simply will not suffice and I drive to Wal-Mart.  If they have it waiting for me to pick up so I don't get out of my car, even better. 

 

I recommended to family to invest in Wal-Mart when it was in the 50's; I wish I took my own advice.

 

I bought in the 50's when the min wage bill passed and WMT took a dip.

[Guest longinvestor]

60% of the U.S. population lives within 5 minutes of a Wal-Mart, and 96% lives within 20 miles.  Wal-Mart has a temporary solution for the last mile and instant delivery problems, let the customer come and pick it up.  There are many times two day shipping simply will not suffice and I drive to Wal-Mart.  If they have it waiting for me to pick up so I don't get out of my car, even better. 

 

I recommended to family to invest in Wal-Mart when it was in the 50's; I wish I took my own advice.

 

What I find when ordering is that there are many items that is not in their store inventory, so shipping is the only option. The choice they are giving customers is ship-to-home or ship-to-store. Where the item ships from a 3rd party, I'm seeing from the labels, that it is shipped by UPS to the store! I'm sure that puts them in a great negotiating position with UPS et al.

 

To add, these 3rd party sales are truly incremental sales, essentially it is approaching the "everything catalog" and it attracts a different demography (upper middle class, former Prime members, like myself) to the store!

 

I too would like the drive by pick up convenience, instead of going inside the store. It is already happening with grocery, it is probably a matter of time.

[Guest longinvestor]

Digital sales keep growing. Some 40% YOY. Who'd have thunk that stodgy old Wal-Mart would do that?

 

Surprise is Sam's Club traffic growth (6%). They closed 65 locations in 2018. Some are fulfillment centers now. As a Plus member, I get free shipping. To be fair, not everything is available to ship to the house. Between that, order-online-pick up-at-store and the Scan & Go app, value is compelling. And like Costco, they keep sending cash back in multiples of the membership fee. Sam's is turning things around. Me thinks this comes at the expense of Amazon more than Costco.

 

Everyone is figuring out shipping to the house.

[Jurgis]

New WalMart people robots:

 

https://eu.usatoday.com/story/tech/2019/04/09/walmart-robots-stores-tasks/3408829002/

 

We saw something similar to Auto-S in our Stop&Shop.

[Liberty]

https://techcrunch.com/2019/04/25/walmart-unveils-an-a-i-powered-store-of-the-future-now-open-to-the-public/

[Guest longinvestor]

It’s great to see Walmart using AI and tech not as the shiny new object. So is stodgy old McLane. Most rational use of technology to build on your business model. If Amazon makes little in retail they will continue to make little.

[Guest longinvestor]

Free next day shipping. My guess is that they turn the 65 shuttered Sam’s Club locations into fulfillment centers.

[walkie518]

this seems like the wrong way to address this problem

 

why wouldn't WMT try to find a way to differentiate rather than compete head-on? 

 

this lack of imagination likely devolves WMT's business model and continues the OCF shrinkage?

 

financial statements certainly reflect a decline since bringing Lore on board... sorry to be a downer

[Guest longinvestor]

this seems like the wrong way to address this problem

 

why wouldn't WMT try to find a way to differentiate rather than compete head-on? 

 

this lack of imagination likely devolves WMT's business model and continues the OCF shrinkage?

 

financial statements certainly reflect a decline since bringing Lore on board... sorry to be a downer

 

Time will tell.

 

WMT is using existing distribution/logistics capabilities versus Amazon having to build or buy. Besides, they seem to be targeting the most common items people buy (toliet paper and such) with the initial 220K SKU's with the next day service. If they have an edge (logistical) on the cost to bring it to customers, this has some very interesting implications in cost advantage (avoidance?) on shipping / handling on the highest volume items. Should they pull this off, how would it be if they start offering the choice of shipping to home versus customers come to pick up at the fulfillment centers, given their "within a mile of most of the US" foot print.

 

Once they settle things down, they could actually give the client money back off the bill should they pick up themselves. How would the increasing Prime Membership fee stack up?

 

I am a regular online grocery customer and I see more and more traffic when I pull up. Their service is outstanding, they even had a dog treat handy for my pooch. They have some of their best employees deployed. They are going to do great with this.

 

 

[dwy000]

this seems like the wrong way to address this problem

 

why wouldn't WMT try to find a way to differentiate rather than compete head-on? 

 

this lack of imagination likely devolves WMT's business model and continues the OCF shrinkage?

 

financial statements certainly reflect a decline since bringing Lore on board... sorry to be a downer

 

 

The minute Walmart cedes this to Amazon they might as well give up.  They have always competed primarily on price (and to a lesser extent selection and service) driven by their leading edge supply chain and logistics.  My view is that this is them still competing on price - cheaper prices than Amazon and now they match convenience without having to pay $119 for membership. 

 

[walkie518]

this seems like the wrong way to address this problem

 

why wouldn't WMT try to find a way to differentiate rather than compete head-on? 

 

this lack of imagination likely devolves WMT's business model and continues the OCF shrinkage?

 

financial statements certainly reflect a decline since bringing Lore on board... sorry to be a downer

 

 

The minute Walmart cedes this to Amazon they might as well give up.  They have always competed primarily on price (and to a lesser extent selection and service) driven by their leading edge supply chain and logistics.  My view is that this is them still competing on price - cheaper prices than Amazon and now they match convenience without having to pay $119 for membership.

 

what I find troubling from WMT's perspective, however, is that when AMZN zigs so too does WMT regardless of relative economic consequences

 

while WMT stock has appreciated materially over the last couple years, neither jet.com nor Walmart.com is competing with AMZN, network effects of the latter are very visible in cash flow from operations (ok, AMZN has AWS and other businesses that WMT does not)

 

as per the last 10-Ks, AMZN is now generating 10% more OCF than WMT while WMT is generating 13% less than in 2017

 

point being that WMT needs some other angle that AMZN doesn't have...find a way to leverage its unused sites to generate economic earnings rather than fight to compete ... if they don't, I hope WMT learned something from Barnes and Noble

 

[Guest longinvestor]

Sam Walton's retail magic worked in the 20th century, actually dominated. If they follow Walton's blueprint, more reasons to dominate in the 21st. Declining disposable income trends is tailor made for Wal-Mart to continue to dominate. Amazon can be an everything store but Wal-Mart will sell the necessities and some of the "everything" catalog. That should do it. They should take Amazon head on. Good for the consumer!

[dwy000]

this seems like the wrong way to address this problem

 

why wouldn't WMT try to find a way to differentiate rather than compete head-on? 

 

this lack of imagination likely devolves WMT's business model and continues the OCF shrinkage?

 

financial statements certainly reflect a decline since bringing Lore on board... sorry to be a downer

 

 

The minute Walmart cedes this to Amazon they might as well give up.  They have always competed primarily on price (and to a lesser extent selection and service) driven by their leading edge supply chain and logistics.  My view is that this is them still competing on price - cheaper prices than Amazon and now they match convenience without having to pay $119 for membership.

 

what I find troubling from WMT's perspective, however, is that when AMZN zigs so too does WMT regardless of relative economic consequences

 

while WMT stock has appreciated materially over the last couple years, neither jet.com nor Walmart.com is competing with AMZN, network effects of the latter are very visible in cash flow from operations (ok, AMZN has AWS and other businesses that WMT does not)

 

as per the last 10-Ks, AMZN is now generating 10% more OCF than WMT while WMT is generating 13% less than in 2017

 

point being that WMT needs some other angle that AMZN doesn't have...find a way to leverage its unused sites to generate economic earnings rather than fight to compete ... if they don't, I hope WMT learned something from Barnes and Noble

Walmart is the largest retailer in the world. They are competing against a company that the market doesnt require it to make money on retailing (take out AWS and the Amazon OCF isnt good).  They either compete or give up and become Sears. At some point, Amazon needs to get profitable on retailing or investors will push them to separate out AWS because it is being dragged down by a sub profitable retailer. Until then, walmart is still the lowest cost retailer and a competitor nobody wants to face. 

 

But I dont have a dog in this fight. Just watching and learning.

[DTEJD1997]

Hey all:

 

WMT is now offering a new service.

 

For all those consumers who don't have the time energy to go grocery shopping, and who don't have the time energy to ACTUALLY put their delivery purchase in the refrigerator, WMT will now do it for you!

 

A WMT associate, wearing a body camera, will come to your house, use a 1 time pass code with your smartlock to get in, and will then place the groceries in your refrigerator!  So now your food will actually just show up in the refrigerator!

 

This is pure genius!  Nothing possibly could go wrong!

 

I wonder how big a market there is for this?  How much of a market is there for this outside of NYC/SF and millenials?

 

It certainly will be interesting to see.

[DooDiligence]

Hey all:

 

WMT is now offering a new service.

 

For all those consumers who don't have the time energy to go grocery shopping, and who don't have the time energy to ACTUALLY put their delivery purchase in the refrigerator, WMT will now do it for you!

 

A WMT associate, wearing a body camera, will come to your house, use a 1 time pass code with your smartlock to get in, and will then place the groceries in your refrigerator!  So now your food will actually just show up in the refrigerator!

 

This is pure genius!  Nothing possibly could go wrong!

 

I wonder how big a market there is for this?  How much of a market is there for this outside of NYC/SF and millenials?

 

It certainly will be interesting to see.

 

 

Not too sure that one's going to get a lot of traction but here's one that's destined to catch on in the "do it for me" economy.

 

https://youtu.be/VedeprHsR-U

[SHDL]

Hey all:

 

WMT is now offering a new service.

 

For all those consumers who don't have the time energy to go grocery shopping, and who don't have the time energy to ACTUALLY put their delivery purchase in the refrigerator, WMT will now do it for you!

 

A WMT associate, wearing a body camera, will come to your house, use a 1 time pass code with your smartlock to get in, and will then place the groceries in your refrigerator!  So now your food will actually just show up in the refrigerator!

 

This is pure genius!  Nothing possibly could go wrong!

 

I wonder how big a market there is for this?  How much of a market is there for this outside of NYC/SF and millenials?

 

It certainly will be interesting to see.

 

Amazon was testing a similar service a while ago, IIRC.  Personally I don’t feel comfortable allowing a random Walmart/Amazon employee walk into my home when I’m not there, but if they somehow partnered with the building’s management team (whom I actually trust) I may change my mind. 

[DTEJD1997]

Hey all:

 

I forgot to add, WMT is overlooking a huge additional market or value added...

 

Forget bringing the food to the house and putting in the refrigerator, what good is that?  That food isn't going to cook itself!  They need associates to bring the food, put it away AND THEN cook it up.  umm, umm good!

 

Then after it's cooked, feed it to me, Roman style!

 

Just think of all the additional revenue they could get!

 

Seriously though, this thing has got to be liability nightmare.  How much screening/background checks are being done on these associates making $9-$10 hour?

 

 

Put aside serial murderers, sex pervert maniacs, and such...what about when they open the door and are bringing the bags in, what if a pet/child/husband escapes through the open door?  What if they leave the refrigerator door cracked open and stuff spoils?

 

What if an associate slips on a pile of strawberry jam on the kitchen floor that you didn't have time to clean up in the past week?

 

What if the associate accidentally breaks/damages something in your house?

 

This would also be a BONANZA for criminals!  While stealing will PROBABLY be pretty limited, as they are wearing body cameras while making the delivery...they could be casing the joint for their criminal compatriots.  Selling information on which places to knock over and which ones to skip.

 

What if they don't close the front door properly and bigfoot gets in?

 

The mind reels at all the problems and mayhem that could happen with this.

[walkie518]

Hey all:

 

I forgot to add, WMT is overlooking a huge additional market or value added...

 

Forget bringing the food to the house and putting in the refrigerator, what good is that?  That food isn't going to cook itself!  They need associates to bring the food, put it away AND THEN cook it up.  umm, umm good!

 

Then after it's cooked, feed it to me, Roman style!

 

Just think of all the additional revenue they could get!

 

Seriously though, this thing has got to be liability nightmare.  How much screening/background checks are being done on these associates making $9-$10 hour?

 

 

Put aside serial murderers, sex pervert maniacs, and such...what about when they open the door and are bringing the bags in, what if a pet/child escapes?  What if they leave the refrigerator door cracked open and stuff spoils?

 

What if an associate slips on a pile of strawberry jam on the kitchen floor that you didn't have time to clean up in the past week?

 

What if the associate accidentally breaks/damages something in your house?

 

This would also be a BONANZA for criminals!  While stealing will PROBABLY be pretty limited, as they are wearing body cameras while making the delivery...they could be casing the joint for their criminal compatriots.  Selling information on which places to knock over and which ones to skip.

 

What if they don't close the front door properly and bigfoot gets in?

 

The mind reels at all the problems and mayhem that could happen with this.

 

 

I appreciate the thought Walmart but not so convincing that this puts the customer first

[rkbabang]

Hey all:

 

I forgot to add, WMT is overlooking a huge additional market or value added...

 

Forget bringing the food to the house and putting in the refrigerator, what good is that?  That food isn't going to cook itself!  They need associates to bring the food, put it away AND THEN cook it up.  umm, umm good!

 

Then after it's cooked, feed it to me, Roman style!

 

Just think of all the additional revenue they could get!

;D

 

There are plenty of value added services that they are ignoring.  If you buy a game they should come by and play it with you.  When you buy a children's book Walmart should come to your house, read it to your children and tuck them in at night.  When you buy condoms they should ... well okay, maybe not.

 

[Liberty]

https://www.vox.com/recode/2019/7/3/18716431/walmart-jet-marc-lore-modcloth-amazon-ecommerce-losses-online-sales

[Jurgis]

Jet.com and Walmart.com are still different platforms, which IMO sucks for customers. I have to lookup and price any purchases on both - and yeah they have different merchandise. Not sure if they have different prices - I think they did some time ago, but perhaps they fixed that at least. I know integration is hard, but so is running two e-commerce platforms.  ::)

[Guest longinvestor]

WMT rocking! Rare stock which has actually gone up in recent times!

[johnny]

Hey all, bumping this thread to talk about shorting this thing.

 

Here's my basic argument, followed by a little background.

 

I think the current price performance of Wal-Mart is quite a bit influenced by the hysteria narrative--specifically the not-so-well-argued notion that Walmart will permanently benefit from bleach-hoarding psychos. I do not believe this to be true, for a variety of reasons. Some of this you've thought of, but I want to be reasonably exhaustive

1. Hoarding pulls forward demand; doesn't generate new demand.

 

All that happened for the most part was that a new channel was invented to stuff--peoples' garages. With the exception of meat spoilage from chest freezers dying, all of these goods sold are going to end up coming at the expense of future sales--I think it's arguably that this may even reduce long-term demand by putting many new bleach-hoarders into a bit of a "scarcity mindset". I definitely was one of these psychos that started buying 5 or 6 tubes of lysol wipes on every visit to Walmart in February. Despite having literally thousands of these wipes, I have been reprimanding other members of my household for wasting them in non-COVID contexts (like wiping the grease off the oven). Obviously I'm a delight to live with.

 

2. Empty shelves and unstable/uneven demand/supply are simply BAD operationally.

This should be pretty self-explanatory. What is Walmart to do when the lysol wipes disappear from their shelves? Well, get more, I guess. What are the odds that everybody nails this perfectly and that we don't end up seeing SKU supply see-sawing from over to under? I'm going to guess it's a net loser. All these businesses wanted to rationalize inventory levels for a reason.

 

3. Empty shelves are TERRIBLE for the Walmart ~mindshare~.

Most of you city-folk don't really appreciate what the Walmart situation is like in smalltown America. As somebody who has been in STA for a few months, let me enlighten you. It is the economic center of gravity for the town. It is where most people presume to get whatever they need. If Walmart doesn't have it, they likely give up any idea of checking somewhere else. Does somewhere else even exist?

 

In the case of my town, there is a Walmart, and then quite a few miles away on the complete other side of town a Safeway. There seems to be very little cross-shopping in the status quo ante. I've noticed in the past few weeks things that are completely 100% sold out every time I go to Walmart that tend to be reasonably well-supplied at Safeway. This doesn't seem like a stable equilibrium. Stock shortages inspire loyal customers to flirt with other solutions, and the losses will probably outweigh the gains since Walmart tends to be the share leader in these rural contexts. But Safeway isn't the big problem here, it's...

 

4. The Internet

I've seen and heard way more interest in e-commerce solutions from people that I would have never pegged as Prime subs. This isn't too surprising. What is worth noting is that this is more than just an Amazon thing--all sorts of e-comm food solutions are experiencing massive new interest. I've talked to a couple of people in a variety of different businesses that aren't exactly head-on competitors to Walmart, but the trend is clear. Example: Talia is a company shipping flash-frozen pizzas from Naples, Italy (by way of Jersey, like most fine Ameritalian products). Their logistics operation ran out of dry ice because of the surge in new customers the last week. Okay, so $15 personal pizzas don't seem like they're attacking the wallet of the core Walmart customer. Except they kind of are. You might think of all Walmart customers as rural peasants buying single ham bones to feed their families soup for the next week, but most of these rural areas have a few hundred rich idiots who are actually just dying to never step foot in there again. But not all of them have known about dartagnan.com. Except now I have boomers asking me about it, so take that for what you will. This is an illustration of the general widesprend trend.

 

But doesn't Walmart have an e-commerce answer, you ask? Funny you should mention that.

 

5. Walmart Groceries app is basically broken (here).

Interest in pickup/delivery has overwhelmed Walmart's ability to fulfill, and their store inventory systems were never very good to begin with, so they basically have given up. As far as I know the offering is essentially discontinued in my town. That didn't stop them from just charging my credit card $98 for the year's delivery subscription. Am I shorting Walmart solely because they charged me $98 10 minutes ago and pissed me off? No, that is insane. Nobody in their right mind would do it. Definitely not.

 

Now let's acknowledge the good: Walmart is handling the COVID issue in a way that I consider to be more prosocial than many hospitals. This is very good. It's also going to be expensive. They have their staff erecting World War Z grocery cart barricades to enforce social distancing, they're distributing PP&E to their employees (I wonder when my local hospital will be doing that!), and of course they have an army of GreatValueBrandDisinfectingWipe-wielding wageslaves attempting to sterilize every self checkout kiosk every 10 minutes. None of this will be cheap. Is it going to be paid for by all of that gross margin Walmart famously extracts from 20 pound bags of rice? I don't think so.

 

What will happen in rural America is this: every single outbreak will begin with a handful of cases that will be reported on very thoroughly by the local media and, more importantly Facebook (buy Facebook). What will happen is the positive test cases will have their last 2 weeks of activity traced, and then there will be a document telling everybody in the neighborhood where those people have been. Guess who is going to be on all of those lists, like fifty times?

 

So with all that said, where does Walmart trade? 23x P/E? with 2.5% revenue growth for the past 3 years?

 

Sell WMT my bros.

 

[Ronchong]

Valid points but just a gentle reminder that valuation by itself is never a good short. I know cause I learnt this the hard way.

 

Entering a short now that may only unfold itself gradually locks up a significant amount of your capital (given margin requirement). The short is relatively less attractive considering the opportunities you can have in the environment right now.

 

Besides, WMT valuation has actually not increase by much when compared to some of the other coronavirus-sensitive companies. (Looking at you, Zoom/Co-diagnostic)

 

 

[johnny]

You're probably right I was just pissed about the $90 charge. Thanks for talking me down before open, I'm feeling much more calm now.