The stock has been going sideways for two years, while same-store sales in the U.S. have been declining.
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Shares of Walmart were trading Monday morning at $75.51, down 2 cents. The stock is down 3.8% this year, compared with an 8% gain for the Standard & Poor's 500 Index.The Bentonville, Ark., company has reacted to its sluggish sales by shuffling the deck chairs. Doug McMillon, 48, is in as CEO, and Greg Foran, who made his mark from the edge of the world, was promoted ahead of more senior executives to head the U.S. unit. The business press is filled with ideas such as splitting up the company, but that won't happen. >>Read More: The Greatest Company You’ve Never Heard Of How could McMillon and Foran turn the ship around quickly?
- Customize -- Every Walmart looks about the same That needs to chang. Stocking more ethnic food in ethnic neighborhoods, or more of what different communities want, such as diapers in areas with lots of new families or Depends in areas with lots of old people, would be a start. And make those displays of what local people want obvious.
- Get In There -- Many towns are now too small for a Walmart. That's how Dollar General (DG) grew, by serving those super-small towns. Walmart now has formats that can serve those small towns.
- Selling Fresh Groceries in Cities -- The best way to compete with dollar stores such as Family Dollar (FDO) in urban areas is through the Walmart Neighborhood Market concept that previous managers were merely testing. Many urban neighborhoods are ripe for Walmarts, because the dollar stores can't turn over fresh produce merchandise quickly enough. Walmart can.
- Do More to Tie Online to Offline -- There is little connection now between Walmart's online efforts and what it's doing in its stores. Even Kroger (KR) is ahead in this area. Help people build shopping lists that can be filled automatically, including support for recipes to reduce food waste. Then build on the relationship in other departments.
- Pay Some People -- Walmart stores look stale compared with those of Target (TGT) because they're understaffed. Hire some folks to do stocking, and build in some pay raises so that good people don't leave for the first hamburger stand opening.
- Health Care Is an Opportunity -- Walmart has been treating health care as a problem, but primary care is rapidly moving toward convenient "doc in a box" urgent care centers and drug stores staffed by para-professionals such as centers opened by CVS (CVS) and Walgreens (WAG) . That is a trend Walmart can get ahead of by signing regional partnerships with local chains.
- Expand Banking Options -- Walmart has an existing relationship with American Express (AXP) for its BlueBird card which offers check cashing and ATM service at a fraction of what check-cashing stores charge, and with more dignity. Expand that aggressively to bring poor people the banking services they need, at a lower cost, and Walmart will win both loyalty and market share.
"We rate WAL-MART STORES INC (WMT) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, reasonable valuation levels, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- WMT's revenue growth has slightly outpaced the industry average of 4.7%. Since the same quarter one year prior, revenues slightly increased by 2.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Food & Staples Retailing industry average. The net income increased by 0.6% when compared to the same quarter one year prior, going from $4,069.00 million to $4,093.00 million.
- WAL-MART STORES INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, WAL-MART STORES INC reported lower earnings of $4.86 versus $5.01 in the prior year. This year, the market expects an improvement in earnings ($5.03 versus $4.86).
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Food & Staples Retailing industry and the overall market, WAL-MART STORES INC's return on equity exceeds that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: WMT Ratings Report