This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Wal-Mart Should Consider Going Private

NEW YORK ( TheStreet) -- Wal-Mart (WMT - Get Report) has a big problem. It's getting too big to invest in.

Over the last year, the stock is up less than 8%. Shares in rival Costco (COST) are up 21%, Target (TGT) is up 24%, and Kroger (KR) is up nearly 64%.

Those three retail rivals, between them, are just 60% of Wal-Mart's size. With nearly $470 billion in sales last year, the needle is just hard to move for Wal-Mart.

Consider. Between 2011 and 2012 Wal-Mart sales grew about $23 billion. Sounds great, but it's barely 5%, the same growth rate as Target. Kroger sales grew just $6 billion, but that's 6% growth. Costco's $10 billion sales gain was still 11% growth.

Then there is the cost of maintaining that size, and engineering that growth:

All this publicity might make you want to take the whole company private.

The thought may be occurring to founder Sam Walton's kids, who have kept stakes in the company through Walton Enterprises LLC. The trust now owns almost 49% of the common stock, family members themselves own another 1.29%, and when the latest $15 billion stock buyback is done those percentages will rise.

This makes Wal-Mart a "controlled company," meaning it's no longer required to have an independent board. The company denied it would start running that way at its annual meeting last month, but the board is shrinking, the percentage of outsiders going down.

At some point, if the law of large numbers discourages investors, if the stock buybacks continue, we could reach a point where the family decides a tender offer for the entire company makes sense.

There are large private companies that grow much faster than public ones. Privately-held Koch Industries managed to double its revenue from 2000 to 2011, expanding company-wide employment fivefold, as the Wichita Eagle reported with pride.

If the Waltons can grow their company faster as a private entity than a public one, why wouldn't they?

At the time of publication, the author was long COST.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Dana Blankenhorn has been a business journalist since 1978, and a tech reporter since 1982. His specialty has been getting to the future ahead of the crowd, then leaving before success arrived. That meant covering the Internet in 1985, e-commerce in 1994, the Internet of Things in 2005, open source in 2005 and, since 2010, renewable energy. He has written for every medium from newspapers and magazines to Web sites, from books to blogs. He still seeks tomorrow from his Craftsman home in Atlanta.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
WMT $66.01 0.50%
AAPL $109.73 -1.40%
FB $91.87 -1.00%
GOOG $635.25 -1.60%
TSLA $232.26 -3.80%


Chart of I:DJI
DOW 16,819.85 +29.66 0.18%
S&P 500 1,979.44 -0.48 -0.02%
NASDAQ 4,741.9320 -6.4290 -0.14%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs