As easy as it is to disparage America's beloved mega-chain of superstores, it seems that Wal-Mart is as resilient as always. However, the company may be facing structural headwinds that could cause some investors to lose confidence in the global giant.
In September, Bloomberg reported that Wal-Mart was experiencing merchandise build-ups at a number of its U.S. locations. The reason is complicated, due partially because of slackening consumer demand, as well as problems with staff management. Part of the latter problem was that Wal-Mart had begun relying heavily on part-time seasonal workers, which impacted the ability of those on duty to understand their jobs adequately. Anecdotes emerged of stores bereft of both good service and some needed items, leading to disgruntled customers and lower sales.
The larger concern is the fact that, as a low-cost alternative to more expensive outlets in the United States, Wal-Mart illustrates an increasingly wider issue: Consumer stress. With less money to spend on even household essentials, Wal-mart's problems portend a wider conflict in the customer-oriented service economy. While the business should weather the concerns – its global operations are profitable, as are its American investments – these developments might not bode well for its stock price.
[WMT] has been shifting up and down more frequently since it entered an Elevated Risk State in late September. SmartStops, an innovative investment portfolio management system, has helped save investors $3.41 per share since the stock's risk profile first became problematic.
While Wal-Mart as a company has plenty more capital to weather an economic storm, its unique cultural position and reliance on low-wage, low-skill workers opens it up to problems that few other businesses share. Investors need to be aware of these risks and plan accordingly.
Categories: Stock News