Corner of Berkshire & Fairfax Message Board

General Category => Investment Ideas => Topic started by: collegeinvestor on December 24, 2010, 08:33:52 PM

Title: WMT - Walmart Inc
Post by: collegeinvestor on December 24, 2010, 08:33:52 PM
What do you guys think of Wal mart as a value investment?
Title: Re: WMT
Post by: Uccmal on December 25, 2010, 08:48:14 AM
My opinion hasn't changed in a year:

http://cornerofberkshireandfairfax.ca/forum/index.php?topic=1215.0

Title: Re: WMT
Post by: roundball100 on December 26, 2010, 05:15:35 PM
WMT seems safe, but, would you feel it offers better value than JNJ, for instance?  What level of return are you aiming for?   
Title: Re: WMT
Post by: maxprogram on December 27, 2010, 08:49:10 AM
A writeup I did a few months back:

http://www.futureblind.com/2010/11/on-wal-mart-stores-inc/

I view Wal-Mart as a good "placeholder" position (with good payout yield: dividend + buybacks) while there aren't many great bargains in the market.

-----

Wal-Mart is often listed as a cheap large-cap, but is owned by surprisingly few value investors. One reason is that it’s big and well scrutinized and hence its price is more “efficient.”  This is partly true, and you won’t get stellar returns investing in Wal-Mart. But it is a cheap, well-managed company that returns cash to shareholders and should fare well under a number of different macro scenarios.

Competitive Advantages

The U.S. stores division of Wal-Mart (about 3/4 of pre-tax profit) has significant competitive advantages. To consumers, Wal-Mart’s brand represents one thing: low prices. Customers in the vicinity of a Wal-Mart remain loyal because they can be certain that they will have the lowest prices. And as long as Wal-Mart doesn’t slack off in the service and facility departments, there will be no good reason for customers to switch.

Wal-Mart can have the lowest prices because of their (1) efficient operations and (2) economies of scale. Operationally, expenses are lower because of their non-unionized workforce and other shrewd cost management (shrinkage, inbound logistics, etc.). This penny-pinching mentality has been ingrained in the company since it was founded by Sam Walton. The biggest cost advantages are from Wal-Mart’s economies of scale. The most obvious consequence is purchasing power—Wal-Mart can buy products at lower prices because they can purchase in such enormous quantities. But the biggest and most un-replicable scale advantage is geographic concentration. Wal-Mart has a “hub and spoke” system of a distribution centers with 100-150 stores around them, all within about a day’s drive. Because of this concentration, costs can be distributed over a larger base of potential customers: distribution, advertising, regional management, etc. Wal-Mart also has some of the most technologically advanced merchandise and logistics systems in the world. This is something that smaller or more spread-out retailers can’t match.

Capital Investment

Wal-Mart has turned their inventory at a faster rate for each of the past 7 years. This is due to better inventory management and logistics, which have allowed Wal-Mart to decrease their inventory per square foot to around $35, giving them an inventory turnover of 12x. This compares to turnover of 13-14x for Costco and 9x for Wal-Mart a decade ago. Return on inventory (margins * turnover) is at an all-time high. This, along with a slightly higher payables period, has turned working capital into a source of capital instead of a use of it.

Recent pre-tax ROIIC (return on incremental invested capital) is about 20% for the entire company, which includes lower-returning international acquisitions. Figures aren’t broken out perfectly, but I estimate that ROIIC for the Wal-Mart Stores division is around 30% with the International and Sam’s Club divisions at 10% and 14%, respectively. These returns once again reflect Wal-Mart’s advantages in the U.S. and their troubles replicating those advantages overseas.

Valuation

Though the price has been up over the past 3 months, free cash flow yield on equity is still around 6-7%, most of which is returned to shareholders through dividends (2.2% yield) and share buybacks (2-3% a year).  Current valuation is also lower than historic multiples. In fact, earlier this summer when shares hit $48, trailing EV/EBIT was 8.6x, the cheapest multiple Wal-Mart has traded at since 1985.

$55 * 3,636.5m shares + $37.8b net debt = $237 billion EV
Trailing EBIT = $24.8b; EV/EBIT = 9.6x

Sum of parts valuation:

$33b – Walmex stake (Market value of $48b, 68.5% stake)
$30b – Other International (10x pre-tax FCF)
$14b – Sam’s Club (11x pre-tax, vs. 10x for BJ and 13x for COST)
$240b – Wal-Mart Stores (15x pre-tax)
($38b) – Net debt
$279b equity value ($77/share)

Growth

U.S. stores are still being reformatted and converted into Supercenters: the percentage of stores in the Supercenter format is 74% versus 28% a decade ago. Also, the Neighborhood Market (NM) concept, which is basically a stripped-down grocery store, is still slowly being rolled out. Both should take share from lower-end grocery stores, and grow square footage 3-4%/year with another 1-2%/year growth in sales per square foot.

As for location growth, it’s hard to picture that many more Wal-Marts in the U.S. But there is still some opportunity here. In their home state of Arkansas, there is one Wal-Mart store for every 32,000 people. With NM’s that number could probably go lower, but that’s just about saturated. A bigger state like Texas has about 66,000 people per store which I figure is a reasonable goal for other areas. To push California to that figure, they’d have to open around 400 stores. To push other states to that level would add another 900. Wal-Mart has historically had trouble with major metropolitan areas like NYC, but that may change as they experiment with NM’s and smaller store formats.

Most new growth for the overall company will come from the International division. Within International, organic growth in emerging markets (South America and China) offers the best opportunities. The biggest segment is Wal-Mart Mexico (Walmex), which now includes Central America, with 2,122 stores. Walmex’s operating income has more than doubled over the past 5 years to $2 billion, and is growing 13% a year.

The biggest risk here is achieving low return on investment in new markets, primarily in growth through acquisitions. They haven’t done well in that regard over the past 5 years, the reason being they have no real advantages in starting or acquiring new companies far from their dominant U.S. business. They recently made an expensive offer for Massmart, a dominant South African discounter, and are bidding on a retailer in Indonesia. Hopefully they will be more disciplined in the future regarding expansion into new areas overseas.
Title: Re: WMT
Post by: woodstove on December 27, 2010, 12:41:34 PM
Hi Maxprogram,

I appreciate your posting your thoughts re Walmart.  I'm no longer holding, but there is some operational terminology in Walmart's press releases that I've wondered about.  Perhaps with your study of Walmart you understand what they are saying?  In their August/10 press release, for instance, they said...

"We continue to focus on our priorities of growth, leverage and returns. ... Our teams leveraged operating expenses for the third consecutive quarter, through their commitment to the productivity loop."

What does it mean to "leverage operating expenses"?  Is that like your illustration of sharing distribution costs by clustering stores?

And what is the "productivity loop", as something that employees can be committed to?  Is there a concept being trained to people?

Thanks for any light you can shed on Walmart's operational culture.
Title: Re: WMT
Post by: beerbaron on December 27, 2010, 01:27:10 PM
"We continue to focus on our priorities of growth, leverage and returns. ... Our teams leveraged operating expenses for the third consecutive quarter, through their commitment to the productivity loop."

If you want my opinion it never means anything. If an educated person can't understand a sentence then that means the person that wrote it did not want you to understand. It sound neat... but seriously what's a productivity loop, and why not explain it in simple terms for the shareholders?

BeerBaron
Title: Re: WMT
Post by: ERICOPOLY on December 27, 2010, 01:39:24 PM
I went to Google and searched on the phrase:  "What is a productivity loop?"

http://intellacore.blogspot.com/2009/10/productivity-loop.html

Take Wal-Mart as an example. It sells similar products as its competitors, yet it is more successful than its competitors. The Wal-Mart and Kmart in the same shopping complex do not compete against the each other. Instead, the supply chains of each company compete against each other. How? Wal-Mart has always focused on improving sales, cutting costs, achieving greater efficiency in distribution, and using innovative IT tools. All of these strategies allow Wal-Mart to lower prices. Additionally, the company has a bigger supply chain, with more suppliers, and then has more opportunities to bring customers into their stores. Therefore, Wal-Mart is more competitive. This example illustrates the productivity loop - lower costs, then lower prices, sell more, and then increase profits.
Title: Re: WMT
Post by: maxprogram on December 27, 2010, 01:48:49 PM
Woodstove:

Definitely some “corporate speak” going on there, so I can only make an educated guess.

I believe the productivity loop is their term for the cycle of (lower costs > lower prices > higher sales). (Edit: Ericopoly's post also illustrates this.)

As for “leveraging operating expenses”, I’m not quite sure. Despite how efficient their logistics and supply operations already are, there is still a fair amount of improvement remaining especially with advancements in technology. For example, they are taking over distribution for their suppliers, which takes advantage of their geographic concentration I mentioned and reduces costs. The CEO of the US Division is very engineering-oriented, from what I hear. If you read the annual letter to shareholders there’s more on this, but I think “leveraging operating expenses” could simply mean increasing expenses at a slower rate than sales.
Title: Re: WMT
Post by: woodstove on December 27, 2010, 02:22:18 PM
Thanks!  That's ok with me, if they have corporate-speak as an efficient way of communicating a concept.  But I hope it gets explained to shareholders!  The descriptions sounds sensible.  Good idea, Eric, to go to the internet!
Title: Re: WMT
Post by: ERICOPOLY on December 27, 2010, 06:44:26 PM
Thanks!  That's ok with me, if they have corporate-speak as an efficient way of communicating a concept.  But I hope it gets explained to shareholders!  The descriptions sounds sensible.  Good idea, Eric, to go to the internet!

I had no idea either -- I agree, why not just speak plainly.
Title: Re: WMT
Post by: beerbaron on December 27, 2010, 09:02:21 PM
Every time I hear those esoteric terms it reminds me of a Dilbert episode where the employees have a BINGO card with buzz words like Proactive, Efficient, Synergy, Paradim, Etc... You gotta give Scott Adams credit for bringing plain English back with common sense.

As for productivity loop, thanks for the search Eric. I still don't understand how the words productivity and loop put together could get to the definition you gave tough.

I'm in the Buffet camp on this one most Annual Reports makes me wanna throw up.

BeerBaron
Title: Re: WMT
Post by: ericd1 on December 28, 2010, 05:28:33 PM
I worked in corporate America for more than 40 years. Every three to five years we re-invented our business via new corporate-speak. Actually little ever changed, except what we called things.

The new lingo typically comes from highly paid consultants that coach executives with their new buzz words. The consultants either write their own book to expand the use of their terminology or embrace some other author's work.

Personally I'm working on an investing-value-loop process, but I can't go into any details yet. You'll have to wait for the book.  :)
Title: Re: WMT
Post by: Uccmal on January 13, 2011, 06:52:16 AM
Another strike against Walmart this morning.  Target buying out Zellers Canada.  Zellers has been the only coast to coast competition to Walmart in their particular space, and a pretty ineffectual one at that.  I am guessing that Target will do well here once they have the supply chains in place.  Zellers has not done well since Walmart expanded here. 

The problem with being number one (WMT) in a space is that everyone wants what you have and eventually someone will be able to take it.
Title: Re: WMT
Post by: twacowfca on January 13, 2011, 07:38:16 AM
A writeup I did a few months back:

http://www.futureblind.com/2010/11/on-wal-mart-stores-inc/

I view Wal-Mart as a good "placeholder" position (with good payout yield: dividend + buybacks) while there aren't many great bargains in the market.

-----

Wal-Mart is often listed as a cheap large-cap, but is owned by surprisingly few value investors. One reason is that it’s big and well scrutinized and hence its price is more “efficient.”  This is partly true, and you won’t get stellar returns investing in Wal-Mart. But it is a cheap, well-managed company that returns cash to shareholders and should fare well under a number of different macro scenarios.

Competitive Advantages

The U.S. stores division of Wal-Mart (about 3/4 of pre-tax profit) has significant competitive advantages. To consumers, Wal-Mart’s brand represents one thing: low prices. Customers in the vicinity of a Wal-Mart remain loyal because they can be certain that they will have the lowest prices. And as long as Wal-Mart doesn’t slack off in the service and facility departments, there will be no good reason for customers to switch.

Wal-Mart can have the lowest prices because of their (1) efficient operations and (2) economies of scale. Operationally, expenses are lower because of their non-unionized workforce and other shrewd cost management (shrinkage, inbound logistics, etc.). This penny-pinching mentality has been ingrained in the company since it was founded by Sam Walton. The biggest cost advantages are from Wal-Mart’s economies of scale. The most obvious consequence is purchasing power—Wal-Mart can buy products at lower prices because they can purchase in such enormous quantities. But the biggest and most un-replicable scale advantage is geographic concentration. Wal-Mart has a “hub and spoke” system of a distribution centers with 100-150 stores around them, all within about a day’s drive. Because of this concentration, costs can be distributed over a larger base of potential customers: distribution, advertising, regional management, etc. Wal-Mart also has some of the most technologically advanced merchandise and logistics systems in the world. This is something that smaller or more spread-out retailers can’t match.

Capital Investment

Wal-Mart has turned their inventory at a faster rate for each of the past 7 years. This is due to better inventory management and logistics, which have allowed Wal-Mart to decrease their inventory per square foot to around $35, giving them an inventory turnover of 12x. This compares to turnover of 13-14x for Costco and 9x for Wal-Mart a decade ago. Return on inventory (margins * turnover) is at an all-time high. This, along with a slightly higher payables period, has turned working capital into a source of capital instead of a use of it.

Recent pre-tax ROIIC (return on incremental invested capital) is about 20% for the entire company, which includes lower-returning international acquisitions. Figures aren’t broken out perfectly, but I estimate that ROIIC for the Wal-Mart Stores division is around 30% with the International and Sam’s Club divisions at 10% and 14%, respectively. These returns once again reflect Wal-Mart’s advantages in the U.S. and their troubles replicating those advantages overseas.

Valuation

Though the price has been up over the past 3 months, free cash flow yield on equity is still around 6-7%, most of which is returned to shareholders through dividends (2.2% yield) and share buybacks (2-3% a year).  Current valuation is also lower than historic multiples. In fact, earlier this summer when shares hit $48, trailing EV/EBIT was 8.6x, the cheapest multiple Wal-Mart has traded at since 1985.

$55 * 3,636.5m shares + $37.8b net debt = $237 billion EV
Trailing EBIT = $24.8b; EV/EBIT = 9.6x

Sum of parts valuation:

$33b – Walmex stake (Market value of $48b, 68.5% stake)
$30b – Other International (10x pre-tax FCF)
$14b – Sam’s Club (11x pre-tax, vs. 10x for BJ and 13x for COST)
$240b – Wal-Mart Stores (15x pre-tax)
($38b) – Net debt
$279b equity value ($77/share)

Growth

U.S. stores are still being reformatted and converted into Supercenters: the percentage of stores in the Supercenter format is 74% versus 28% a decade ago. Also, the Neighborhood Market (NM) concept, which is basically a stripped-down grocery store, is still slowly being rolled out. Both should take share from lower-end grocery stores, and grow square footage 3-4%/year with another 1-2%/year growth in sales per square foot.

As for location growth, it’s hard to picture that many more Wal-Marts in the U.S. But there is still some opportunity here. In their home state of Arkansas, there is one Wal-Mart store for every 32,000 people. With NM’s that number could probably go lower, but that’s just about saturated. A bigger state like Texas has about 66,000 people per store which I figure is a reasonable goal for other areas. To push California to that figure, they’d have to open around 400 stores. To push other states to that level would add another 900. Wal-Mart has historically had trouble with major metropolitan areas like NYC, but that may change as they experiment with NM’s and smaller store formats.

Most new growth for the overall company will come from the International division. Within International, organic growth in emerging markets (South America and China) offers the best opportunities. The biggest segment is Wal-Mart Mexico (Walmex), which now includes Central America, with 2,122 stores. Walmex’s operating income has more than doubled over the past 5 years to $2 billion, and is growing 13% a year.

The biggest risk here is achieving low return on investment in new markets, primarily in growth through acquisitions. They haven’t done well in that regard over the past 5 years, the reason being they have no real advantages in starting or acquiring new companies far from their dominant U.S. business. They recently made an expensive offer for Massmart, a dominant South African discounter, and are bidding on a retailer in Indonesia. Hopefully they will be more disciplined in the future regarding expansion into new areas overseas.


Many thanks maxprogram. That's the best short write up on WalMart I've seen.  :)
Title: Re: WMT
Post by: txlaw on March 11, 2011, 02:51:49 PM
Interesting developments for Walmart with the new small store format push and the "Pick Up Today" option.

http://www.nytimes.com/2011/03/11/business/11shop.html?src=recg
Title: Re: WMT - Walmart Inc
Post by: Liberty on July 07, 2011, 08:04:33 AM
Not a company I'd buy, but here's an argument for it being cheaper than in 2009 right now. I thought I'd add it to the pile here:

http://www.gurufocus.com/news/138076/why-steven-romick-thinks-walmart-wmt-stock-is-cheaper-than-it-was-in-march-2009

Quote
Wal-Mart stock was traded at as low as $46.5 in March 2009. It appreciated about 15% to today’s $53.7 over the past two 27 months. Why is it cheaper today? Because Wal-Mart’s earnings per share has grown by more than 15% during the past 27 months. Since the fiscal year ended in Jan. 2009, Wal-Mart has grown its total revenue by 5%. The company’s net profit margin expand from 3.3% to 3.9%. Its earnings has grown 23%. In the meantime, Wal-Mart has retired more than 11% of its shares during the past 27 months. Therefore its earnings per share has grown 34% over the past 27 months.
Title: Re: WMT - Walmart Inc
Post by: bathtime on August 15, 2011, 11:04:11 AM
Bill Cara update on Walmart on 8/7:

http://caracommunity.com/content/bill-caras-week-review-32-2011-0

"This week in the quarter-yearly WIR 6-19-32-45 series; Value Line reported on one DJIA component, Walmart (WMT), a Cara 100 company.

Previously I stated in this space: “All traders carry their biases into portfolio management decisions. I may not be a big trader of WMT, but I certainly understand the continuum of financial and operational success of the company, if not the share price.” Now, I can tell you that, late this week, we bought some WMT. In fact, we built a new Cara 100 and started to put cash to work at the low prices of the past few days.

Clearly I like the Walmart stock at these levels. You don’t buy WMT to flip it, but as part of a core portfolio, because over the years the company has strong and improving fundamentals.

This Friday, Value Line lowered the 6-month Technical (“short-term”) outlook from an outperforming ‘2’ to a market average ‘3’. I think they panicked. Maybe, on the other hand, VL decided to weight all the Dow 30 as a ‘3’? Maybe they decided to over-weight the cyclicals? No; I think they just panicked.

There are many times to seize the opportunity in the cyclicals, but seldom do you see these situations arise in the staples, and when you do, you have to go for it, i.e., if you want a fairly well-balanced portfolio.

Interesting is that 54% of Walmart’s US revenue comes from groceries, where huge volume enables the company to reduce the prices below any competitor. Also noted; the public doesn’t want to food shop in mega-stores, so Walmart is proceeding to build 300 small-format stores in the next five years.

I note that a lot of cash flow is going to buy back shares. Within a couple years, there will likely be just 2.90 billion shares outstanding from today’s 3.47 billion, and well down from the 4.45 billion outstanding ten years ago. While the share price may not have done much over this time, the per share revenues, cash flow, earnings, and book value has almost tripled. The dividends have gone from $0.27 to $1.44/share for 2011 and are expected to be $1.75 for 2012. The latter would, as already pointed out, yield a high return of 3.44% on today’s cost base. Return on shareholder equity (23.0%) and Gross Margin (25.0%) is the highest ever and will likely hold or possibly increase a tad. Global revenues are expected to continue growing at a rate of +9.0% or more per year.

At this week’s close of $50.85, it makes sense to me to buy with a view to a long-term hold."
Title: Re: WMT - Walmart Inc
Post by: PlanMaestro on April 22, 2012, 09:18:26 AM
I live in Mexico. I understand that sometimes it's impossible to do anything real estate related without lubricating the system.

But to use bribes as a strategy in scale to crush the competition directly from the very top? And let's not talk about the hush-up.

http://www.nytimes.com/2012/04/22/business/at-wal-mart-in-mexico-a-bribe-inquiry-silenced.html
Title: Re: WMT - Walmart Inc
Post by: PlanMaestro on April 23, 2012, 02:11:17 PM
Where Does Wal-Mart’s Alleged Bribery Rank?

http://blogs.wsj.com/law/2012/04/23/where-does-wal-marts-alleged-bribery-rank/
Title: WMT - Walmart Inc
Post by: dwy000 on October 14, 2015, 11:51:00 AM
Anyone kicking the tires of WMT after today's bloodbath?

When they come out and detail that sales will grow 3-4% annually and that they will generate $80bn of cash over the next 3 years, on a market cap of $190bn, my ears definitely start to prick up!
Title: Re: WMT - Walmart Inc
Post by: AzCactus on October 14, 2015, 12:12:02 PM
I would be somewhat interested in learning more if they were buying back shares like crazy right now. 
Title: Re: WMT - Walmart Inc
Post by: dwy000 on October 14, 2015, 12:32:49 PM
I would be somewhat interested in learning more if they were buying back shares like crazy right now.

To be fair they announced that they have fully used up their previous share repurchase allocation and committed to buy back $20bn of stock over the next 2 years.  That's more than 10% of market cap (today) over the next 2 years.
Title: Re: WMT - Walmart Inc
Post by: Picasso on October 14, 2015, 12:38:24 PM
I'm curious how they balance that with the shares being sold by the Walton's.
Title: Re: WMT - Walmart Inc
Post by: handycap5 on October 14, 2015, 12:49:13 PM
i view WMT's announcement (basically continued middling revenue growth, but a significant increase in costs to counteract the loss of business to Amazon) as a huge negative for the retail space generally. WMT is a very large, strong business which faces an existential threat from Amazon - and it is going to spend real money to try aggressively turn things around. i imagine this will come in the form of offering, pricing, logistics, etc. and since "me too" offerings don't seem to do well online, WMT will have to not just meet but beat AMZN's offerings.

if Sears' prospects looked unfavorable with WMT in a torpor, how are they when WMT is willing to thrash aggressively to compete?

i bet they wish they had prevailed in the Quidsy sale.

others comments?
Title: Re: WMT - Walmart Inc
Post by: Picasso on October 14, 2015, 12:55:26 PM
Yeah that was my first thought as well.  Sears as a retailer is pretty much screwed.
Title: Re: WMT - Walmart Inc
Post by: karthikpm on October 14, 2015, 03:33:39 PM
i view WMT's announcement (basically continued middling revenue growth, but a significant increase in costs to counteract the loss of business to Amazon) as a huge negative for the retail space generally. WMT is a very large, strong business which faces an existential threat from Amazon - and it is going to spend real money to try aggressively turn things around. i imagine this will come in the form of offering, pricing, logistics, etc. and since "me too" offerings don't seem to do well online, WMT will have to not just meet but beat AMZN's offerings.

if Sears' prospects looked unfavorable with WMT in a torpor, how are they when WMT is willing to thrash aggressively to compete?

i bet they wish they had prevailed in the Quidsy sale.

others comments?

Will Walmart survive or thrive with these low margins and lower prices?  Are there any examples of a non-niche brick and mortar company successfully competing against Amazon?
Title: Re: WMT - Walmart Inc
Post by: Palantir on October 14, 2015, 05:21:36 PM
WMT actually has a nice online store. Wonder if it will amount to anything here.
Title: Re: WMT - Walmart Inc
Post by: rkbabang on October 14, 2015, 05:50:26 PM
WMT actually has a nice online store. Wonder if it will amount to anything here.

I don't know what the people are like in Walmarts nation wide, but I told my wife not to ever buy anything online at Walmart again and have it shipped to our local store.  It took me over an hour to pickup 3 items that my wife purchased.   And no, there was no one in line in front of me.  The person couldn't find the order on his computer (even though I had a print out of the receipt and the email telling me that the order was ready) then he couldn't find the boxes in back.  Then he couldn't figure out how to use the register to do whatever it was he had to do before letting me take them.  Then he didn't want to let me take them, because I wasn't my wife, even though she put me as an authorized person to pick it up. I had a seat and just waited, and waited, and waited....he even kept appologising to me and telling me that he was "a little slow sometimes".  Even thanked me for not getting mad and yelling at him the way some people do.  I much prefer Amazon Prime to the freakshow you see by entering that place (both the workers and the customers).   Walmart has a long way to go if it wants to compete with Amazon, It needs to offer free shipping to your home for one, I don't see it happening.
Title: Re: WMT - Walmart Inc
Post by: Jurgis on October 14, 2015, 06:02:29 PM
they will generate $80bn of cash over the next 3 years

How exactly they are going to generate $80bn of cash over the next 3 years?
Is this FCF after capex? OCF?

Edit: it looks like they might do $20B OCF this year, so I guess $80bn in next 3 years is also OCF.
Title: Re: WMT - Walmart Inc
Post by: hyten1 on October 14, 2015, 06:48:56 PM
i guess my experience is unique? i use to pretty much only buy from amazon.

but its been a few years where i have been splitting my purchase btw amazon and walmart. amazon doesn't always have the best price. and when i do buy from walmart i always get free shipping as long as the order is over $50.

hy
Title: Re: WMT - Walmart Inc
Post by: 50centdollars on October 14, 2015, 07:14:41 PM
http://www.marketwatch.com/story/warren-buffetts-390-million-loss-on-wal-marts-stock-is-nothing-next-to-the-walton-familys-loss-2015-10-14
http://www.bloomberg.com/news/articles/2015-10-14/wal-mart-heirs-see-9-billion-vanish-in-a-day-as-shares-plummet

If you read the idiot news (see above), you would think that walmart is going bankrupt or warren buffett lost $400 million today or even worse, the waltons lost $11 billion.

Market Cap =the number of outstanding shares of a company multiplied by the last known share price it traded at. While this may at first seem like a neat way to value a company, it is fundamentally flawed in a number of ways:

1.  If anyone with a big share in a company (like the WalMart heirs) tried to sell their bulk shares, the stock price would plummet and they would never realize the full value of their stock.

2.  The price the last chump paid (the chump being retail investors like you and me) multiplied times the number of shares means nothing, as retail investors tend to overpay for stocks (act shocked).

3.  The market cap number doesn't accurately value what a company is worth in terms of liquidation value, take-over price, or whatever.  The real value of any company is usually far less than the "market cap" number - perhaps by half.

4.  Even when companies "buy out" another company, all they usually do is offer existing shareholders stock in the new combined company.   Very rarely does someone "take a company private" by purchasing all of the stock at market prices.

5.  You can't "lose money" in a company until you sell the stock.  So the Wal-Mart heirs did not lose $11 Billion today or any day, except the day they sell their stock and take a loss.   Since they inherited the stock, however, they get a stepped-up basis in the stock (the value of the stock the day Sam Walton died) and thus they may not see any loss, but perhaps a huge capital gain.

6.  Phantom or "paper" gains and losses thus mean nothing, until you actually cash out of a company and realize these gains or losses.   And as the market has demonstrated over the last two months, huge losses can be replaced by huge gains - negating any "loss" in short order.


Is Wal-Mart in trouble?  Hardly.  The world's largest retailer isn't about to close its doors.   Are profits down?  Yes, but probably for reasons you would not expect.  As the economy improves, more and more people are shopping in higher-end stores.  The Internet is siphoning off a lot of sales of commodity products.   Costs of Chinese-made goods are higher.  Wages are rising as the economy improves.   There are a number of factors.

Oh, but that is boring, right?   Better to have a click-bait headline that says "Wal-Mart Heirs lose $11 Billion" so the plebes can enjoy a little schadenfreude at their expense.  And let's face it, a lot of people hate Wal-Mart and hate rich people, so they click on these utterly meaningless articles in a knee-jerk fashion.

I saw one analyst say some bullshit like Buffett is probably mad today that this news came out. Mad you say? He is probably jumping for joy. How many times does the guy say he hopes his stocks go down?????? He is probably buying today and will buy more as it goes down further.

Financial journalist are something. Market Cap - or changes in Market Cap - are utterly meaningless.

Most financial news is a joke and should be ignored.
Title: Re: WMT - Walmart Inc
Post by: longinvestor on October 14, 2015, 07:42:55 PM
http://www.marketwatch.com/story/warren-buffetts-390-million-loss-on-wal-marts-stock-is-nothing-next-to-the-walton-familys-loss-2015-10-14
http://www.bloomberg.com/news/articles/2015-10-14/wal-mart-heirs-see-9-billion-vanish-in-a-day-as-shares-plummet

If you read the idiot news (see above), you would think that walmart is going bankrupt or warren buffett lost $400 million today or even worse, the waltons lost $11 billion.

Market Cap =the number of outstanding shares of a company multiplied by the last known share price it traded at. While this may at first seem like a neat way to value a company, it is fundamentally flawed in a number of ways:

1.  If anyone with a big share in a company (like the WalMart heirs) tried to sell their bulk shares, the stock price would plummet and they would never realize the full value of their stock.

2.  The price the last chump paid (the chump being retail investors like you and me) multiplied times the number of shares means nothing, as retail investors tend to overpay for stocks (act shocked).

3.  The market cap number doesn't accurately value what a company is worth in terms of liquidation value, take-over price, or whatever.  The real value of any company is usually far less than the "market cap" number - perhaps by half.

4.  Even when companies "buy out" another company, all they usually do is offer existing shareholders stock in the new combined company.   Very rarely does someone "take a company private" by purchasing all of the stock at market prices.

5.  You can't "lose money" in a company until you sell the stock.  So the Wal-Mart heirs did not lose $11 Billion today or any day, except the day they sell their stock and take a loss.   Since they inherited the stock, however, they get a stepped-up basis in the stock (the value of the stock the day Sam Walton died) and thus they may not see any loss, but perhaps a huge capital gain.

6.  Phantom or "paper" gains and losses thus mean nothing, until you actually cash out of a company and realize these gains or losses.   And as the market has demonstrated over the last two months, huge losses can be replaced by huge gains - negating any "loss" in short order.


Is Wal-Mart in trouble?  Hardly.  The world's largest retailer isn't about to close its doors.   Are profits down?  Yes, but probably for reasons you would not expect.  As the economy improves, more and more people are shopping in higher-end stores.  The Internet is siphoning off a lot of sales of commodity products.   Costs of Chinese-made goods are higher.  Wages are rising as the economy improves.   There are a number of factors.

Oh, but that is boring, right?   Better to have a click-bait headline that says "Wal-Mart Heirs lose $11 Billion" so the plebes can enjoy a little schadenfreude at their expense.  And let's face it, a lot of people hate Wal-Mart and hate rich people, so they click on these utterly meaningless articles in a knee-jerk fashion.

I saw one analyst say some bullshit like Buffett is probably mad today that this news came out. Mad you say? He is probably jumping for joy. How many times does the guy say he hopes his stocks go down?????? He is probably buying today and will buy more as it goes down further.

Financial journalist are something. Market Cap - or changes in Market Cap - are utterly meaningless.

Most financial news is a joke and should be ignored.

+1 to everything you said.
Title: Re: WMT - Walmart Inc
Post by: Picasso on October 14, 2015, 07:48:05 PM
Just go read the comments on the top Reddit post related to WMT.  This is why value investing works.  You'd think WMT was going out of business, nevermind the billions of FCF.  Everyone let's go invest in AMZN instead!  Isn't is so much better to have a bird in the bush versus two or three in the hand?
Title: Re: WMT - Walmart Inc
Post by: Eye4Valu on October 14, 2015, 07:52:49 PM
Not too far off Berkshire's cost basis of $56
Title: Re: WMT - Walmart Inc
Post by: FCharlie on October 14, 2015, 08:08:01 PM

Will Walmart survive or thrive with these low margins and lower prices?  Are there any examples of a non-niche brick and mortar company successfully competing against Amazon?

 I'd much prefer to own a $192 billion Wal Mart that "unsuccessfully" competes against Amazon while generating $80 Billion of cash from operations over three years, repurchases $20 billion of stock at multi year lows, sits on $120 billion of real estate, with forty years of dividend increases,  than the "successful" $254 billion Amazon which has wonderful sales growth but none of those highly overrated other qualities like huge cash flow, buybacks, real estate, and dividend growth.
Title: Re: WMT - Walmart Inc
Post by: bookie71 on October 14, 2015, 08:27:38 PM
As one of my son's said, "I would rather go to the dentist, than to shop at Walmart"
Title: Re: WMT - Walmart Inc
Post by: fareastwarriors on October 14, 2015, 08:30:42 PM
As one of my son's said, "I would rather go to the dentist, than to shop at Walmart"

Lots of people hate/dislike WalMart but every time I go, there are always a ton of people shopping there. Yes the demographics might not be what one sees at a Whole Foods or Trader Joes but WalMart gets the job done.
Title: Re: WMT - Walmart Inc
Post by: Picasso on October 14, 2015, 08:33:08 PM
$500 billion of sales probably means someone shops there. I think investors who are naturally in the 1% of the population just naturally think that everyone shops at Target or Trader Joes. It explains the love for Amazon.
Title: Re: WMT - Walmart Inc
Post by: Palantir on October 14, 2015, 08:48:16 PM

Will Walmart survive or thrive with these low margins and lower prices?  Are there any examples of a non-niche brick and mortar company successfully competing against Amazon?

 I'd much prefer to own a $192 billion Wal Mart that "unsuccessfully" competes against Amazon while generating $80 Billion of cash from operations over three years, repurchases $20 billion of stock at multi year lows, sits on $120 billion of real estate, with forty years of dividend increases,  than the "successful" $254 billion Amazon which has wonderful sales growth but none of those highly overrated other qualities like huge cash flow, buybacks, real estate, and dividend growth.

Interesting you say this, because people like to talk about finding the "next WMT" or the "next BRK" or the next etc...but when the most likely candidate to be the next WMT is sitting right there in AMZN, it's greeted with mockery. Curious.
Title: Re: WMT - Walmart Inc
Post by: handycap5 on October 15, 2015, 05:51:49 AM
i am concerned about the retail space broadly defined (separate from the discussion about what the right prices for the common stocks should be).

1) amazon will somewhat inevitably go to $300B+ gross merchandise sales in the next many years domestically, basically doubling. a) with negative working capital, there is no cash flow barrier to achieving this, b) bezos strategy is clear and no one else involved with the company has the influence to alter the strategy, whether or not it makes or loses money on an accounting basis, and c) the prime offering is and will continue to be very compelling for consumers (once you have a costco card, you never buy your toilet paper anywhere else - prime is similar). one can appreciate that this is a huge consumer giveaway, whether or not amazon proves down the road that it can make decent operating margins (remember that AMZN ROIC is not a disaster even today with the negative WC).

2) WMT has two options among many: a) age gracefully and try to milk the "melting icecube," to mix metaphors, or b) appreciate that amazon has changed the competitive dynamics unfavorably and engage in the competition aggressively, knowing that the eventual profit pool will be less than before. With their announcement, WMT seems to be going down the second path. this will add to the competitive pressure in the retail space broadly defined.

3) i think one needs to be very sensitive to store-level economics. BBBY, as an example, basically has stagnant comps, but costs inherently go up with inflation. Negative store-level operating leverage is a big deal for store-based businesses. No matter how fast its online business is growing off a small base, one primarily owns a store-based retailer. WMT is similar.

to sum it up, the profit pool in retail is going to shrink dramatically, and there will be a lot of wealth destruction - to the consumers benefit. Someday, I expect there will be some very attractive niche opportunities among the survivors, but I am skeptical they exist today. but does anyone disagree with my framework or believe they know interestig retail opportunities for the current environment?
Title: Re: WMT - Walmart Inc
Post by: Palantir on October 15, 2015, 06:04:05 AM
With 28B ocf-12b capex, we get 16b fcf/235=6.8% cf yield, hardly compelling. Assuming capex is all maintenance since there is such little growth.
Title: Re: WMT - Walmart Inc
Post by: dwy000 on October 15, 2015, 06:46:42 AM
With 28B ocf-12b capex, we get 16b fcf/235=6.8% cf yield, hardly compelling. Assuming capex is all maintenance since there is such little growth.

Market cap is down to $190 after yesterday.  I haven't researched it but they claim $11bn capex going forward.  And they specifically stated the $80bn in cash being added over the next 3 years in the press release.  But they don't derail how that is calculated (maybe asset sales in there or better working capital if they aren't opening stores).

Still, 40% of market cap in cash over the next 3 years is pretty compelling, especially if the underlying business continues to grow over that period (albeit very slowly).
Title: Re: WMT - Walmart Inc
Post by: Jurgis on October 15, 2015, 06:57:00 AM
There's no way they gonna do $80b-over-3-years FCF if you include maintenance capex.

$80b-over-3-years is OCF.
Title: Re: WMT - Walmart Inc
Post by: Palantir on October 15, 2015, 07:02:06 AM
With 28B ocf-12b capex, we get 16b fcf/235=6.8% cf yield, hardly compelling. Assuming capex is all maintenance since there is such little growth.

Market cap is down to $190 after yesterday.  I haven't researched it but they claim $11bn capex going forward.  And they specifically stated the $80bn in cash being added over the next 3 years in the press release.  But they don't derail how that is calculated (maybe asset sales in there or better working capital if they aren't opening stores).

Still, 40% of market cap in cash over the next 3 years is pretty compelling, especially if the underlying business continues to grow over that period (albeit very slowly).

Are you adding back 49b debt? Idk if they have a pension liability. That 80b cf has to be OCF, as noted above. Forgot to add back 2b interest, so 18/235= 7.7% yield, which is okay....
Title: Re: WMT - Walmart Inc
Post by: dwy000 on October 15, 2015, 08:13:17 AM
With 28B ocf-12b capex, we get 16b fcf/235=6.8% cf yield, hardly compelling. Assuming capex is all maintenance since there is such little growth.

Market cap is down to $190 after yesterday.  I haven't researched it but they claim $11bn capex going forward.  And they specifically stated the $80bn in cash being added over the next 3 years in the press release.  But they don't derail how that is calculated (maybe asset sales in there or better working capital if they aren't opening stores).

Still, 40% of market cap in cash over the next 3 years is pretty compelling, especially if the underlying business continues to grow over that period (albeit very slowly).

Are you adding back 49b debt? Idk if they have a pension liability. That 80b cf has to be OCF, as noted above. Forgot to add back 2b interest, so 18/235= 7.7% yield, which is okay....

I didn't add back debt because, even using OCF that's after debt service (so just equity cash flows). 
Title: Re: WMT - Walmart Inc
Post by: wachtwoord on October 21, 2015, 12:41:09 AM
I'm considering freeing up some cash for this. Thanks for the discussion.
Title: Re: WMT - Walmart Inc
Post by: johnny on October 21, 2015, 06:26:39 AM
Seems to me like Walmart has had the past ten years to get ready for a fight to the death with Amazon and has accomplished absolutely nothing.

I think it should take more than a single digit FCF yield to get excited about the business.
Title: Re: WMT - Walmart Inc
Post by: valueinvestor82 on October 21, 2015, 09:18:38 AM
Johnny, and Amazon will win this battle how? Since Amazon has such amazing financial stats and FCF? It doesn't take a genius to sell products at a loss and deliver terrible results every quarter. Bezos' genius has been to be a good salesman to Wall Street. Walmart actually has a moat, sustainability, and attractive valuation. Call me a sadist but I can't wait to see amzn finally fall victim to reality.
Title: Re: WMT - Walmart Inc
Post by: Parsad on October 21, 2015, 01:17:33 PM
Walmart just needs to spin-off Sam's Club and sell off all other non-core assets.  If they focus solely on the big box stores, smaller city stores and their online business, they will be just fine.  Cheers! 
Title: Re: WMT - Walmart Inc
Post by: johnny on October 28, 2015, 06:27:06 PM
Johnny, and Amazon will win this battle how? Since Amazon has such amazing financial stats and FCF? It doesn't take a genius to sell products at a loss and deliver terrible results every quarter. Bezos' genius has been to be a good salesman to Wall Street. Walmart actually has a moat, sustainability, and attractive valuation. Call me a sadist but I can't wait to see amzn finally fall victim to reality.

Maybe you think Bezos is an idiot, and Amazon is a scam, but that doesn't change the fact that they are throwing billions of dollars every year into a fulfillment infrastructure that Walmart will eventually be forced to compete with. Those fulfillment centers filled with tens of thousands of Kiva robots are sort of like oil rigs set up with dubious economics: 1. They are going to continue to exist no matter how bad of an investment they turned out to be, and 2. Marginal costs will determine market outcomes, not total cost.

When Amazon has (maybe stupidly) invested ten billion dollars in fulfillment centers, robots in those centers, cars running routes emanating from those centers, will they have a cost-advantage for marginal fulfillment? I think a common phenomenon offers a glimpse of the future: sometimes when people order something for 2-day shipping on Prime, they are surprised to receive the package a day early (or occasionally even same day). What does this mean? Amazon is doing so much business in certain areas that the cost-difference between same-day, 1-day, and 2-day delivery disappears. As sales volume increases in a given area, this phenomenon becomes more common.

Prime Now is an app that specifically filters down to inventory held in local fulfillment centers, offering a 2-hour delivery window (1 hour if you're willing to pay). This is all textbook scale advantage stuff. And if it has taken them billions in losses to get there, rather than being dismissive and condescending about it, you should be asking how and when Walmart plans to compete with that.

How have they competed so far? Well, it has been 10 years since Prime launched, and Walmart has just recently started pushing ShippingPass, which notably offers "3-day shipping" to members. It took them ten years to (soft)launch an offering that is 50% slower. What about that makes you feel confident about the future?
Title: Re: WMT - Walmart Inc
Post by: valueinvestor82 on October 28, 2015, 06:46:53 PM
I appreciate your thoughtful response. The problem is, Amazon spends roughly 10% (WACC) to earn 5%, and the highly touted "AWS" doesn't make the money that they claim. Fulfillment centers won't change the fact that they suck at being a PROFITABLE low cost retailer. They sell items at losses, the numbers show this. So I think Walmart will simply need to outlast their ability to have massive debt financings every few years as their assets reach their 3-4 year end of their useful lives (see end of 2014 financing) and wait for stock to be insufficient to pay employees, and Amazon will gradually end up being something different than it is today, if it is to survive.

I am both an Amazon customer and a Walmart customer, and I know that I will stop using Amazon the moment I can get the same price on my purchase along with immediate gratification by driving a few blocks down the street.
Title: Re: WMT - Walmart Inc
Post by: Parsad on October 28, 2015, 10:12:25 PM
Amazon is going to eat Walmart's lunch one day...12-15 years from now!  So if you plan on holding Walmart for 20 years, you might be in trouble. 

Now, I don't know how many times I've said this before, but there is a big difference between the long-term viability of a business and whether it is a good short-term investment.  In this case, without hesitation, only a fool would believe that Amazon is the better investment based on valuation, fundamentals, revenue, earnings, cash flow and net profit. 

I'm sure self-driving cars are going to significantly impact Geico's business one day, but is that going to make Geico unprofitable over the next 10-15 years?  Probably not.  Cheers!
Title: Re: WMT - Walmart Inc
Post by: johnny on October 29, 2015, 07:56:23 AM
Yeah, there is definitely a price where it makes sense to buy a company that is going to slowly die, but that's not the sort of rationale I typically hear invoked when people talk about Walmart. More than anything less, people seem to have a "worst case" scenario of the company where its revenues, margins, and therefore net income simply stagnate and it turns into a perpetual bond.

So if you're comfortable with the idea that Amazon is the future, there two important inputs are:

1. How will Walmarts revenue decay over time? and

2. Will the giant stores and operating leverage come back to haunt Walmart when those revenues start decreasing? How badly will the economics of a given Walmart store be impaired when they lose 10% of their traffic?

Just to break out of bear character for a second, I think a reasonable argument can be made that the Amazon model is not a universal one, and that it only really works at or above a specific population density. And given how much of Walmart's sales originate from rural America, I'd say it is reasonable that those are relatively safe customers for a while. Certainly Amazon's last-mile delivery integration (which forms a pretty important component of my "scale advantage" argument) is limited to only the largest US cities for now.
Title: Re: WMT - Walmart Inc
Post by: frank87 on October 29, 2015, 08:44:09 AM
Interesting how people get more negative on a stock and find reasons to rationalize that sentiment when the stock is down.
Title: Re: WMT - Walmart Inc
Post by: Picasso on October 29, 2015, 08:56:29 AM
Personally, I think the current price of WMT is insane when you look at valuations across the rest of the market.

You have the low cost retailer doing close to $500 billion of sales.  In ten, twenty years from now WMT is going to crack sales over a trillion.  They actually return 100% of free cash flow back to shareholders.  They have generated large returns on capital for decades. They still generate 12-15% returns on invested capital.  Like Amazon they also have negative working capital.  Free cash flow over the next few years will amount to around $50 billion.  They own close to a billion square feet of real estate.  They have other hidden assets like Walmex.  Less than a couple years ago, the entry of a Walmart store would push up the prices of nearby real estate. 

But the market thinks this is only worth $180 billion, or less judging how the market expects the stock to keep falling.  If Walmart is screwed where else are we supposed to invest?
Title: Re: WMT - Walmart Inc
Post by: handycap5 on October 29, 2015, 09:05:49 AM
can someone who owns the stock explain why they find it attractive, possibly including a EPS number something similar a few years out with which they are quantifying the attractiveness?

negative operating leverage at the store level is a scary development. competing against a superior offering who offers lower prices, may have lower costs, and is willing to do so at a lower margin is a scary competitive dynamic. and the impetus to feel like you have to compete by significantly increasing investment is maybe good money after bad (and may come in the form of investment by lower profits). but price is cheap. please help me...
Title: Re: WMT - Walmart Inc
Post by: Picasso on October 29, 2015, 09:23:09 AM
can someone who owns the stock explain why they find it attractive, possibly including a EPS number something similar a few years out with which they are quantifying the attractiveness?

negative operating leverage at the store level is a scary development. competing against a superior offering who offers lower prices, may have lower costs, and is willing to do so at a lower margin is a scary competitive dynamic. and the impetus to feel like you have to compete by significantly increasing investment is maybe good money after bad (and may come in the form of investment by lower profits). but price is cheap. please help me...

I think you have a situation where the market is ignoring the long-term cash generation, assigning some low multiple to what might be trough earnings, and assuming the long-term value of WMT is now impaired.   That's not how I'm looking at the stock.

Rather just look at how much cash they can return to shareholders over the next several years and then the next decade and decade after that.  Even if they never grow the same way again and exhibit flat/slightly declining earnings you're going to get your entire investment back in less than ten years.  And if this is a short-term issue (which it probably is) then you're going to make a lot of money over time and this is not the kind of stock you have to worry about selling.

There are easy things WMT can do to fix the problem.  Clean up the stores, pay their employees better, make it easier and faster to shop in their stores, etc.  And the spend necessary to fix that is what is causing the drop in EPS for the next few years.  The Amazon effect is debatable but I think that most investors have no idea how the majority of the world shops.  Most people in this country are not as affluent as most of us investors.  So I can see why people want to value Amazon at over a hundred billion over WMT (with no operating profits when adjusting for various things) because it's easier to see the Amazon packages at your neighbors house and the massive growth in revenue. 

If I told you the catalyst to see better earnings will come in three years, would you buy the stock?  Most investors would not.  But for someone with a time horizon longer than a few years you can take advantage of the fact that 95% of the market no longer has the patience to wait that long.  And so you have a situation where the current price on WMT stock dramatically undervalued the long-term cash that will be generated on that share price.  EPS in a few years is irrelevant.

Obviously the market disagrees with me.
Title: Re: WMT - Walmart Inc
Post by: rpadebet on October 29, 2015, 09:44:36 AM
I maybe going up against the opinion of some very experienced investors here but I think AMZN will eat WMT's lunch soon unless they get their business model re-oriented. There has been some discussion on this in the AMZN thread but the key reasons why AMZN is a better investment than WMT long term are as follows

a) AMZN has developed a better mouse trap for the future. To give a early 20th century analogy, WMT is the best buggy whip manufacturer going up against AMZN's cars.

b) Negative WC for AMZN as opposed to low but positive for WMT. Negative WC is form of float, so returns are levered without taking on actual debt. This float grows as long as AMZN grows (like GIECO float) whereas WMT has to invest in WC to grow.

c) this is the most important- AMZN is still able to deploy all the cash they generate internally at very high ROIC's. WMT generates a lot more cash admittedly, but pays it out, as reinvestment opportunities in their business model are limited. For an investor AMZN's tax efficient reinvestment is great as we don't have to pay taxes on cash payouts and then find opportunities to reinvest ourselves. Usually over the long term companies that reinvest internally at high ROIC's tend to perform better than cash cows.

Finally, it is a myth that prices at AMZN are low compared to brick and mortar retailer like WMT. Most times the prices are higher or same. There are 2-3 dynamics at play here though 

 - AMZN given its electronic model can change prices hundreds and thousands of times a day. Try doing this at a WMT store more than once a day (you have to change labels on all aisles- not much fun!)

 - Selection of products - again the nature of the business model at AMZN lends itself to offer an order of magnitude higher selection than WMT. If you want some rare herbal product for some instance, would you rather search through the aisles at WMT or search for it on the AMZN app? This is actually where AMZN can make their margin, not on the consumer electronics which people focus on.

- Convenience - I don't know about others, but as a prime subscriber, unless it is a really beautiful day outside, I find it convenient to order stuff via AMZN store, even if it means I pay a dollar more for cereal or diapers. Driving to the store in rain/snow, finding parking, searching through the aisles, bagging the merchandize and bringing it back home, takes a lot more work and time than searching online, clicking to add to your cart and get things delivered to your doorstep in 1-2 days. (then i can spend the time researching why amzn is better than wmt :) )


Title: Re: WMT - Walmart Inc
Post by: Picasso on October 29, 2015, 09:51:36 AM
Where do you see positive working capital on WMT?  Maybe we're calculating it different ways.
Title: Re: WMT - Walmart Inc
Post by: dwy000 on October 29, 2015, 09:58:37 AM
I maybe going up against the opinion of some very experienced investors here but I think AMZN will eat WMT's lunch soon unless they get their business model re-oriented. There has been some discussion on this in the AMZN thread but the key reasons why AMZN is a better investment than WMT long term are as follows

a) AMZN has developed a better mouse trap for the future. To give a early 20th century analogy, WMT is the best buggy whip manufacturer going up against AMZN's cars.

b) Negative WC for AMZN as opposed to low but positive for WMT. Negative WC is form of float, so returns are levered without taking on actual debt. This float grows as long as AMZN grows (like GIECO float) whereas WMT has to invest in WC to grow.

c) this is the most important- AMZN is still able to deploy all the cash they generate internally at very high ROIC's. WMT generates a lot more cash admittedly, but pays it out, as reinvestment opportunities in their business model are limited. For an investor AMZN's tax efficient reinvestment is great as we don't have to pay taxes on cash payouts and then find opportunities to reinvest ourselves. Usually over the long term companies that reinvest internally at high ROIC's tend to perform better than cash cows.

Finally, it is a myth that prices at AMZN are low compared to brick and mortar retailer like WMT. Most times the prices are higher or same. There are 2-3 dynamics at play here though 

 - AMZN given its electronic model can change prices hundreds and thousands of times a day. Try doing this at a WMT store more than once a day (you have to change labels on all aisles- not much fun!)

 - Selection of products - again the nature of the business model at AMZN lends itself to offer an order of magnitude higher selection than WMT. If you want some rare herbal product for some instance, would you rather search through the aisles at WMT or search for it on the AMZN app? This is actually where AMZN can make their margin, not on the consumer electronics which people focus on.

- Convenience - I don't know about others, but as a prime subscriber, unless it is a really beautiful day outside, I find it convenient to order stuff via AMZN store, even if it means I pay a dollar more for cereal or diapers. Driving to the store in rain/snow, finding parking, searching through the aisles, bagging the merchandize and bringing it back home, takes a lot more work and time than searching online, clicking to add to your cart and get things delivered to your doorstep in 1-2 days. (then i can spend the time researching why amzn is better than wmt :) )

That's all great but why does that make Amazon a better investment today?  Some would argue that everything you've pointed out and more has already been priced into the stock.  The assumptions on growth, margin expansion and reduced spending (which are contrary to each other) that are required to ultimately generate the cash flows that would justify todays price are hardly realistic.

I also think the idea that WMT, Target, Costco, Kohls, Macy's, Jet and everyone else will just stand still and let the market slip away from them is somewhat naïve.  They may be slow and cumbersome but they bring a lot of resources and customers to bear.
Title: Re: WMT - Walmart Inc
Post by: rpadebet on October 29, 2015, 10:55:36 AM
dwy000,
I think we discussed this earlier this year in the AMZN thread, when AMZN was trading around $300 and WMT around $85-90. ;)

I don't want to put too much stock in short term performance, but I agree at current prices the odds have shifted a bit. AMZN is higher and WMT is lower, but if you hold for long term, current price wouldn't matter as much to the return you would eventually realize. As Charlie Munger pointed out, in the long term an investors return would tend towards the return on the incremental capital investment either company makes from here on.

On the other hand,  if you are playing for a short term mean reversion of both valuations, then I won't argue. I will play that too if the relative valuations get that skewed. :)

Btw, to compare apples to apples, you would need to take off about 50-70b off the market value of AMZN attributable to AWS. WMT isn't in that business. Then compare the Gross merchandize value sold annually at each (AMZN's GMV should be adjusted for 3p sales where they only book a % margin instead of the entire sale amount as revenue). AMZN might appear relatively expensive even by that retail EV/GMV metric, but adjusted for growth prospects and reinvestment opportunities, it is reasonable in my opinion.

To be totally honest, WMT is no chump. I don't think they will be rolled over that easily, but the tail winds AMZN has (secular 15% ecommerce growth and AMZN taking market share within that, ease of global expansion for e-commerce players as opposed to B&M stores) is just too strong.

Scary thing for WMT and even other non-retailers is Bezos is a reinvestment machine. He doesn't care about current reported profts or evidently current cashflows as much (although in his letters he asks investors to focus on cash flows). He will reinvest as much as he can and fast as he can, if there is market share to be taken. In all honesty, I think an unstated goal of AMZN's is to get as close to 0 reported profts as possible each quarter. I too didn't appreciate this sort of capital allocation until I read about John Malone's methods.

Bezos is already building the second leg of the stool in AWS (retail being the first leg). He is now getting started on the 3rd leg - Media and advertising. AMZN could easily be bigger than AAPL if Bezos doesn't get hit by a bus in the near future.

AMZN has a founder-owner-operator and that is an advantage in itself. I guess if Sam Walton were alive and still running WMT, I would have loved to see these two aggressive businessmen compete. That would be a fight worth paying for.

Title: Re: WMT - Walmart Inc
Post by: dwy000 on October 29, 2015, 12:26:29 PM
rpadebet - congrats on the share price doubling. Getting good investment gains is really hard so regardless of the reason for it I commend it! 

So what's your intrinsic value of AMZN?  If value investing is by definition buying something below intrinsic value, what do you see that value as for Amazon?  It certainly can't be cheap at any price, right?  Why was it cheap at $300 and still cheap (but less so at $600)?  I can't for the life of me figure out the math.

Can you also point out how you are calculating ROIC?  Amazon has no cash return (well, $600M after cap leases but not subtracting stock based comp). 
Title: Re: WMT - Walmart Inc
Post by: Picasso on October 29, 2015, 12:28:47 PM
I'm also curious how he gets positive working capital requirements. WMT has had massive nevative working capital forever.
Title: Re: WMT - Walmart Inc
Post by: rpadebet on October 29, 2015, 01:41:55 PM
I'm also curious how he gets positive working capital requirements. WMT has had massive nevative working capital forever.

Picasso,
I am sorry, I may have got things mixed up. Yes WC is negative for WMT. I was referring to the cash conversion cycle which we discussed on the AMZN thread as well. (it has been negative for AMZN and low positive for WMT)  See the comparative charts in the link below to get an idea of difference in WC management efficiency inherent in the business models. It is also mainly because they take longer to pay their suppliers.

http://www.forbes.com/sites/ycharts/2012/03/10/the-cash-conversion-cycle/ (http://www.forbes.com/sites/ycharts/2012/03/10/the-cash-conversion-cycle/)

dwy000,

It is really tough to sense sarcasm on internet message boards, but I do sense a little bit in your post. Your instinct maybe right, I might have just gotten lucky. It is difficult to separate luck from skill in a bull market anyway.

@300 AMZN was obviously cheap in my opinion when I valued it as described.
@600 it is clearly not as cheap. All I am saying is it might not be as overvalued as people here seem to suggest.If they continue to execute as they have, few years from now there is a good chance even 600 might prove cheap.

Regarding your question about ROIC calculation - I estimate it by looking at growth in BV per share.
It was 6.24$ as of dec-2008 and 26.5$ as of end of Sep-2015. It has compounded at 24% approximately in this period

Now do the same for WMT - 16.71$ in 10/2008 to 24.53 in 7/2015 (all my data is according to Factset). That is a 5.85% compound. Adjust this for the dividends paid and you will get a compounding close to 8-9%.

Obviously future returns will depend upon what rate each company is able to compound in the future. Make what you will out of this, I just think Bezos can reinvest at a better tax adjusted rate than I can from any cash WMT might throw my way.




Title: Re: WMT - Walmart Inc
Post by: dwy000 on October 29, 2015, 02:15:54 PM
No sarcasm there at all.  I sincerely congratulate you or anyone else who had the guts to take a position in Amazon at $300 and get a double out of it.  Now, I'm not kicking myself for sitting on the sidelines as I often do when I miss a big move, because I still don't understand the rationale behind it. 

To your point that it was cheap at $300 in your opinion (and less so now), what was the intrinsic value calculation that you made to get that view?  This is not meant as a "gotcha", it is a legitimate question to see what I'm missing. 

From the original discussion on the Amazon board to now, I haven't seen anyone do a realistic intrinsic value calculation that justified the investment.  It was always based on the argument that Amazon will be bigger tomorrow than today and revenues will grow for a long time.  Well, okay, yeah but that doesn't mean it's cheap.  Whenever I tried putting numbers behind it, there was no scenario that was even close to realistic that PV'd back to being a value based investment. 
Title: Re: WMT - Walmart Inc
Post by: johnny on October 29, 2015, 02:23:31 PM
You have the low cost retailer doing close to $500 billion of sales.  In ten, twenty years from now WMT is going to crack sales over a trillion.  They actually return 100% of free cash flow back to shareholders.

Thanks for the thoughts. I appreciate what you have to say, but I have a problem with these two statements.

The first is that if you look at domestic Walmart same-store sales for the past FIVE years, here is what you find:

2011: -1.6%
2012: +0.2%
2013: +1.8%
2014: -0.6%
2015: +0.5%

That is a five year picture, so if you are projecting that Walmart is on track to add $500 billion more annual sales, I think your theory for how that happens needs to reconcile the glorious future with the mediocre past.

On management's shareholder-friendly cashflow policies: in this case I think it is coming from a position of weakness and not strength. Look at how the stock has been absolutely punished in the past few months. Why did this happen? Because management indicated that EPS would drop slightly next year while they invested more into the business? What does this say about the sort of shareholders that have been attracted to the company?

Since management's options probably just got completely smashed by this recent sell-off, how does this experience shape management's incentives going forward? Why should they ever again subordinate short-term EPS to long term strategic goals? I'd be very afraid that they will have learned their lesson here, and will never again do something so stupid.

I am reminded of Dell here: I believe that Dell spent more money on share repurchases than it earned during its entire existence as a public company. This didn't work out very well for most of the investors involved, even though a lot of those repurchases were at bargain prices, from a FCF yield perspective.

That said, I think the decay of Walmart is likely to be slow, and there is a very good chance that a buyer at today's prices will have more than a few nice exit opportunities. So I'm not here to hurt anybody's feelings about it. I just think that it is a little too easy to adopt an overly simplistic "here's a business I understand" thesis with Walmart, while simultaneously writing off Amazon as "too complicated".

You may find Dreadnoughts to be straightforward and easy to understand, and you may even be able to buy them at bargain prices. But if somebody else is spending all of their time building U-boats, you could still end up with a very mediocre outcome.
Title: Re: WMT - Walmart Inc
Post by: Picasso on October 29, 2015, 02:47:35 PM
Walmart is going to represent some relatively fixed percentage of the overall economy, whether that is 5, 10, or 20 years from now. Rather than just look at SSS, look at sales per share from 2011 to 2015 and now include another $20 billion of share purchases and another $20 billion of dividends the next three years. That alone is worth at least $12 on a $57 stock. Is the remaining business really worth only $45?  As a WMT shareholder you are going to own a large part of the economy and increasingly more over time based on reinvesting those capital returns.

As time goes on either they find a way to maintain or grow SSS as the economy grows or they are going to run into some negative operating leverage. So far we have not even seen evidence of big drops in SSS.  Will that happen and we suddenly find WMT trade for 5x earnings?  Because that is pretty much the only way you lose investing at this price.

Investors are assuming that a rapidly rising Amazon stock price while Walmart reinvests capital (funny how Amazon spending money means growth but Walmart spending capital means destruction) and lowers guidance points to the demise of shareholder returns. If Walmart is indeed doomed to poor returns then so if everyone else and you guys are going to be extraordinary rich from Amazon.  You will have then finally  seen mostly everyone else go out of business and Amazon can finally start pulling in higher margins. 

Nevermind the fact that Amazon issues a ton of stock at half the price it trades for today and you won't call that an expense.  I suspect we are going to see some more "Buffett lost his marbles investing in WMT, KO, etc" fairly soon. 
Title: Re: WMT - Walmart Inc
Post by: Schwab711 on October 29, 2015, 03:31:51 PM
I'm still looking into WMT but I agree with Picasso, there is a lot to like! AMZN has AWS but I really like WalmartLabs, Sam's Club, WMT Mexico, property ownership (obligatory mention of REIT potential), and WMT's market share lead in grocery. It blows my mind that WMT has negative WC! There are dozens of >$1b companies that list WMT as their top customer by a country mile.

If WMT takes some risks with their online site then I could see them steal share. A video/streaming partnership seems likely at some point if they don't already have some. There are still a lot of things I think WMT does better than AMZN because of their distribution network and brick-and-mortar stores (grocery, furniture, clothing/baby stuff, ect). I don't have much more to add right now.
Title: Re: WMT - Walmart Inc
Post by: Picasso on October 29, 2015, 03:35:09 PM
I mentioned this to someone else but if WMT trades for 10x, they can start creating a REIT at a 5-6% cap rate versus the 10% earnings yield the stock trades for.  900mm square feet of real estate gives them a lot of protection.

Anyway who knows if they do it or not but those assets are real and you can unlock them if necessary. 
Title: Re: WMT - Walmart Inc
Post by: valueinvesting101 on October 29, 2015, 03:52:56 PM
I'm still looking into WMT but I agree with Picasso, there is a lot to like! AMZN has AWS but I really like WalmartLabs, Sam's Club, WMT Mexico, property ownership (obligatory mention of REIT potential), and WMT's market share lead in grocery. It blows my mind that WMT has negative WC! There are dozens of >$1b companies that list WMT as their top customer by a country mile.

If WMT takes some risks with their online site then I could see them steal share. A video/streaming partnership seems likely at some point if they don't already have some. There are still a lot of things I think WMT does better than AMZN because of their distribution network and brick-and-mortar stores (grocery, furniture, clothing/baby stuff, ect). I don't have much more to add right now.

Is it worth for WMT to have high payable on their books? They basically hold this inventory for free but their supplier get paid later. So supplier must be financing these funding gap with short term borrowing. So now you have

supplier cost + short term borrowing cost = supplier COGS
Supplier sale price (WMT COGS) - supplier COGS = profit.

I guess WMT borrowing cost would be lower than supplier's borrowing cost. Does it make sense for them to push this financing to supplier? Can WMT pay them immediately with short term borrowing on WMT's book but get even lower COGS?
Title: Re: WMT - Walmart Inc
Post by: rpadebet on October 29, 2015, 03:54:40 PM
I mentioned this to someone else but if WMT trades for 10x, they can start creating a REIT at a 5-6% cap rate versus the 10% earnings yield the stock trades for.  900mm square feet of real estate gives them a lot of protection.

Anyway who knows if they do it or not but those assets are real and you can unlock them if necessary.

I don't know guys, but once you start hoping for a retailers value to be realized through real estate, you are clubbing it with the infamous Sears and Jc penny....

Maybe you guys are more pessimistic about wmt than I am. :)

I like wmt is investing in growth now. I don't care whether they make their eps. If eps driven investors dump the stock because of this, I will gladly buy. I am yet to see a strong strategic offense being mounted  towards AMZN.  I will be out until I see clear decisive, all in commitment towards that.

I guess management change is required to overhaul strategy to such extent. So that could be the investment catalyst here.
Title: Re: WMT - Walmart
Post by: rpadebet on October 29, 2015, 04:20:32 PM
No sarcasm there at all.  I sincerely congratulate you or anyone else who had the guts to take a position in Amazon at $300 and get a double out of it.  Now, I'm not kicking myself for sitting on the sidelines as I often do when I miss a big move, because I still don't understand the rationale behind it. 

To your point that it was cheap at $300 in your opinion (and less so now), what was the intrinsic value calculation that you made to get that view?  This is not meant as a "gotcha", it is a legitimate question to see what I'm missing. 

From the original discussion on the Amazon board to now, I haven't seen anyone do a realistic intrinsic value calculation that justified the investment.  It was always based on the argument that Amazon will be bigger tomorrow than today and revenues will grow for a long time.  Well, okay, yeah but that doesn't mean it's cheap.  Whenever I tried putting numbers behind it, there was no scenario that was even close to realistic that PV'd back to being a value based investment.

Dwy000,

Why do you need to calculate a specific intrinsic value? Does it make a better investment only if you can calculate something exactly? We are not talking about a melting ice cube in AMZN or a steady slow grower w hich can be modeled in excel.

Heck I don't even know if their largest business 15y from now will be retailing or aws or media or advertising. Each of these has their own economics and scalability factor.

Their retail scale helped incubate aws. Their aws scale along with prime subscription is now helping incubate media. This could eventually help incubate advertising which feeds into retail again. It is the flywheel effect.

I can't really figure out what the sell price on such a business should be just yet. Once growth saturates, reinvestment opportunities run out and they start paying dividends or start accumulating cash, I could then hopefully put a sell price on it.


AMZN is to WMT, what WMT was to SHLD 20-30 years ago. WMT should know that to survive and thrive, they need to drastically reinvent themselves for the next generation. If they are smart they will use their B&M stores and cash flow to fund that reinvention. MSFT had to do this recently. IBM did it a few times and has to do it again. Most good companies figure out they need to do this eventually.
Title: Re: WMT - Walmart Inc
Post by: Picasso on October 29, 2015, 04:20:45 PM
Walmart actually has a competitive advantage versus JCP or whoever else. Their real estate or other assets are just a form of asset protection on the downside.

I supposed the assets that GE or MCD has sold/might sell makes them like JCP in that logic.

You also happen to get the low cost leader that will still be generating substantial cash flows iin 10, 20 plus years.
Title: Re: WMT - Walmart
Post by: dwy000 on October 29, 2015, 04:29:59 PM

Dwy000,

Why do you need to calculate a specific intrinsic value? Does it make a better investment only if you can calculate something exactly? We are not talking about a melting ice cube in AMZN or a steady slow grower w hich can be modeled in excel.


I don't need specific, down to the penny calculations and I think you understand that.  But there has to be some estimate of intrinsic value or there is no basis to say that it's a buy.  Surely it's not inexpensive at any price, right? So why is $600 too low? or $300? or $20? or $1000?

Isn't the whole premise of value investing the idea of buying $1 of value for $0.80 (or cheaper)?  How can you buy something without having a view as to what the true underlying intrinsic value is?  And that value has to be based on some rational view of future revenues and cash flows.
Title: Re: WMT - Walmart Inc
Post by: Schwab711 on October 29, 2015, 05:19:47 PM
Do you think Buffett would rather own 100% of PCP or 17.5% of WMT (both roughly $32b)?

17.5% of WMT generated $2.9b in FCF
100% of PCP generated $1.25b in FCF (probably more like $1.4-$1.5b "earnings power")
Title: Re: WMT - Walmart Inc
Post by: FCharlie on October 31, 2015, 08:09:54 AM
I would not be surprised at all to see Buffett buying WMT at these prices.

What is amazing to me is that many people are now predicting the slow death of WMT. I've never known a company that is growing same store sales, growing square footage, and generating enormous and growing operating cash flow, to be dying. It's almost as if people are looking at the stock price decline and assuming it must be because the company is dying and this will continue forever, that anyone who invests is guaranteed to lose should they hold long enough.

WalMart just gave a three hour presentation to the investment community, the presentation is on their website. The main driver of flat sales is not declining same store sales. In fact, same store sales are rising. The main driver is currency headwinds. The main driver of declining E.P.S. is the massive investment in wages. These investments are stretched over two years and will moderate after next year.

WalMart generates a staggering amount of cash. Their capex is going to moderate after next year, at the same time the investments in wages will moderate. This company will generate a ton of additional free cash, on top of the significant free cash they generate today. The $20 billion buyback will create enough cash savings on the dividend to allow WMT to raise the dividend over 10% and still not pay out more total cash. The company owns a giant real estate portfolio, but unlike Sears and JCPenney, WalMart owns this property and still makes a ton of money too.

Ultimately, the investment thesis is that I can't see any possible way Wal Mart investors at today's prices lose money long term. The next couple years of dividend and buyback as noted above are worth $14 per share alone. The real estate is likely worth half the stock price. Sales are rising, the store footprint is growing, free cash flow will rise, the dividend is rising and has been increased every year for almost 50 years. The buyback is giant and puts a strong floor under the stock price. Amazon is not going to kill WalMart. WalMart has too much financial firepower to just roll over and die. At today's prices and using today's likely trough earnings, a discounted earnings or cash flow calculator tells us that WMT shares are pricing in only about 2% growth into perpetuity. Those types of assumptions, which can easily be exceeded simply through share repurchases, are the types of assumptions I look for. Combine those low growth assumptions with a growing top line, growing footprint, growing same store sales, massive real estate, massive buyback, rising dividend and I don't know what else a value investor would need to make this a significant position.
Title: Re: WMT - Walmart Inc
Post by: CorpRaider on October 31, 2015, 08:19:20 AM
Yeah i was sort of thinking about the potential opportunity here, but ive pretty much decided on adopting "no retail" as a permanent item on my checklist.
Title: Re: WMT - Walmart Inc
Post by: Cardboard on October 31, 2015, 08:21:51 AM
I agree that the assumption about Wal-Mart dying are grossly exaggerated. In Florida last year, the store close by my place was jam packed every day. They are very busy in Canada too and their addition of grocery is a success.

It is funny that people are destroying Wal-Mart share price with justifications like Amazon will take over the world but, not Kroger, Loblaws, Target (16 to 19 times earnings vs 12.5). Are these not the real fatalities down the road?

Wal-Mart is not cheap enough for me yet but surely getting there.

Cardboard
Title: Re: WMT - Walmart Inc
Post by: johnny on October 31, 2015, 08:36:46 AM
I realize that this is in some sense just polite adoption of corporate framing, but this idea that Walmart is "investing" in wage increases is nonsense. Wage increases are an expense, not an investment. The fact that some $9/hr employee in 2015 will make $10/hr in 2016 has absolutely no positive impact on the results of the company in 2017. This is not a sign of strength, but weakness. And considering labor productivity is perhaps the Number 1 domain where Amazon's retail model triumphs over Walmart's, I think it should be very concerning to see them tacitly acknowledge they'll have to spend even more on labor just to tread water.

Believe it or not, I'm still on the fence about Walmart. I am considering buying it right now, but more as a trade than anything (I do think their death will be quite gradual, and their buyback plans are aggressive). I don't think it is up for debate that they are currently losing the most important fight of their existence to Amazon. That doesn't mean they can't come back, but my concern is that they seem completely delusional about what it is going to take to do that, and in projecting their delusions, are building up an equally delusional base of investors. Not you guys though, you guys are lovely. ;)

I'll watch this video and share my unappreciated notes on it later.
Title: Re: WMT - Walmart Inc
Post by: rb on October 31, 2015, 09:40:21 AM
I realize that this is in some sense just polite adoption of corporate framing, but this idea that Walmart is "investing" in wage increases is nonsense. Wage increases are an expense, not an investment. The fact that some $9/hr employee in 2015 will make $10/hr in 2016 has absolutely no positive impact on the results of the company in 2017. This is not a sign of strength, but weakness. And considering labor productivity is perhaps the Number 1 domain where Amazon's retail model triumphs over Walmart's, I think it should be very concerning to see them tacitly acknowledge they'll have to spend even more on labor just to tread water.

Believe it or not, I'm still on the fence about Walmart. I am considering buying it right now, but more as a trade than anything (I do think their death will be quite gradual, and their buyback plans are aggressive). I don't think it is up for debate that they are currently losing the most important fight of their existence to Amazon. That doesn't mean they can't come back, but my concern is that they seem completely delusional about what it is going to take to do that, and in projecting their delusions, are building up an equally delusional base of investors. Not you guys though, you guys are lovely. ;)

I'll watch this video and share my unappreciated notes on it later.
"Investing" is just retail jargon the whole industry talks like that. "Invest in wages", "invest in price cuts", etc.

I don't really see how the wage hike is a weakness. They didn't have to do it because they couldn't find staff. I think they just tried to get ahead of a public and PR wave that's coming. That's actually better than in the past when they've been on the wrong side of that wave. I also think you're totally wrong in your thinking that Amazon will have a wage advantage over WalMart. Amazon whether they like it or not will have to hike/match wages. Other retailers probably as well. The only difference is that Walmart actually has the cash flow to pay the raise.
Title: Re: WMT - Walmart Inc
Post by: Parsad on October 31, 2015, 11:42:52 AM
I realize that this is in some sense just polite adoption of corporate framing, but this idea that Walmart is "investing" in wage increases is nonsense. Wage increases are an expense, not an investment. The fact that some $9/hr employee in 2015 will make $10/hr in 2016 has absolutely no positive impact on the results of the company in 2017. This is not a sign of strength, but weakness. And considering labor productivity is perhaps the Number 1 domain where Amazon's retail model triumphs over Walmart's, I think it should be very concerning to see them tacitly acknowledge they'll have to spend even more on labor just to tread water.

Believe it or not, I'm still on the fence about Walmart. I am considering buying it right now, but more as a trade than anything (I do think their death will be quite gradual, and their buyback plans are aggressive). I don't think it is up for debate that they are currently losing the most important fight of their existence to Amazon. That doesn't mean they can't come back, but my concern is that they seem completely delusional about what it is going to take to do that, and in projecting their delusions, are building up an equally delusional base of investors. Not you guys though, you guys are lovely. ;)

I'll watch this video and share my unappreciated notes on it later.

The "investing" word is definitely spin, but the truth is that by increasing wages at Walmart, they will reduce employee turnover.  This is a huge problem at big-box stores, especially in their distribution warehouses. 

Loblaws actually has a bounty out in Canada that if you refer a warehouse distribution employee, they will pay depending on region, anywhere from $2,000-3,000 referral fee when that employee is hired.

Big-box stores spend over $3,000-4,000 per floor/warehouse employee in training and recruitment costs, and roughly $8,000-10,000 on supervisor hires.  But they have something like 35% turnover on floor/warehouse staff and 10-15% turnover on supervisory staff annually.

Unfortunately or fortunately, another fact of reality is that big-box store employees are generally patrons of big-box stores because of the value received for their hard-earned dollars, and with increased wages will spend more of their income dollars at those stores, including Walmart.

So increased wages mean increased expenses, but the actual cost won't be as onerous as markets perceive.  Cheers!
Title: Re: WMT - Walmart Inc
Post by: johnny on October 31, 2015, 04:29:08 PM
Parsad: Agree totally that increasing wages is necessary for what they're trying to accomplish. I just don't like the idea that investors should adopt that spin when talking amongst each other. But I'm absolutely convinced that Walmart (and others) pushed way too hard on labor in the past to get margins where they wanted them to be, and that has helped accelerate the changes going on in retail.

rb: I didn't mean to suggest that somehow Amazon was going to get away with not raising wages. Rather, my point is that the rising cost of an input will generally be competitively advantageous for whichever party uses that resource most sparingly/efficiently/productively. Amazon's FCs are far more labor efficient than Walmart SCs, and there is a definite ceiling to how much efficiency Walmart can squeeze out of its higher-paid labor, since they are forcing employees to maximize two goals that are often in conflict (Goal 1: Maximize sales/payroll. Goal 2: Be there whenever a customer has a question, comment, or just wants to chat for five minutes about how many brands of toothpaste there are nowadays).

Amazon is able to completely segregate the vast majority of its retail workforce so that Goal 2 is nonexistent and irrelevant, leaving everybody to focus entirely on Goal 1.

I haven't finished the video yet, but here's the impression I have so far: They've got a perfectly good plan for improving the experience of Walmart stores, but they still haven't confronted the reality that a -great- Walmart in-store experience is completely inferior to the no-store experience that Amazon represents.

The Supercenter was a specific piece of technology, perfectly suited to the 1990s. Now we have a company with thousands of Supercenters run by a management facing a lot of incentives to try and argue that the Supercenter is -the- right technology for today. 3,000 supercenters, at 150,000 square feet, serving a dual-role as retail storefront and miniature-distribution center do not seem to me like the format of the future. 1 million square foot fulfillment centers, run almost entirely by software and robots, utilizing humans only for thumb-related tasks, really strikes me as the technology that is going to "win the future of retail," to borrow a phrase I have heard approximately 500 times so far in the past two hours.

There is nothing about this reality that precludes Walmart from competing effectively, except their apparent reluctance to actually acknowledge it. I can see a perfectly good strategy here, where the Supercenter business continues generating tons of cash, and that cash is then used to built out an intelligent e-commerce platform. I am just skeptical of that actually happening, and I cringe every time I hear somebody mention things like "delivering your online order to you in the Walmart parking lot".

Sorry if I sound like a broken record guys! I'm just trying to use the conversation to clean up my thinking here.
Title: Re: WMT - Walmart Inc
Post by: longinvestor on November 01, 2015, 07:00:43 AM
Being a shopper at both Amazon and Walmart, I find some of the pronouncements about B&M stores' demise ludicrous.

I spend about $1000-2000 a year on Amazon. Of $15000-20,000 in total retail spending. I don't see this ratio changing by much for the foreseeable future. And I am a guy with 24 hour internet access, available credit, a checkbook etc.

Many folks that shop B&M because that's the only place they can. Payday loans, cash and even tax rebate checks etc. is all they ever will likely use. Wal-Mart is often the only place they go to.

They likely also don't get on this board
Title: Re: WMT - Walmart Inc
Post by: vinod1 on November 01, 2015, 10:40:53 AM
I do not agree with folks who think Amazon would eat Walmart's lunch. There are quite a few barriers for Amazon online model as it relates to Walmart

1. The core Walmart customer - lower income level and living on paycheck to paycheck with low cash balances - buys stuff just for that week or next two weeks. These customers are not going to be Amazon shoppers for the vast majority of their purchase of essentials. As longinvestor already pointed out above, they are vastly different from COBF board members.

2. More than 50% of Walmart sales are groceries. Majority of the people prefer buying fresh produce after they look and feel them, look at expiration dates, etc. These constitute a a significant part of the grocery basket.

3. It is going to be more expensive to deliver small quantities to customers then it would be to buy them at store. So Walmart would retain a cost advantage on some of the products at least in some of the markets - rural and suburban markets.

So Walmart is going to have a segment of the market where it is competitively advantaged relative to Amazon.

Walmart has not really focused on Online so far and their current efforts so far have been subpar.

My question is, what competitive advantage does Amazon have when it builds its distribution centers - automated with robots as they might be, why would Walmart not be able to build them if it deems them necessary? Is there anything that Amazon does in these distribution centers that Walmart would not be able to copy? They certainly can afford it and the Walton family with 50% stake would certainly be understanding if short term results need to take a back seat to protect long term viability.

Vinod


Title: Re: WMT - Walmart Inc
Post by: vinod1 on November 01, 2015, 10:45:50 AM
I bought some garden furniture at Walmart online and when I tried to pick up at around 6 PM on a Saturday, the said that online pickup section was closed. The email confirmation said it would be open until 10 PM. As I was talking with the store manager, one of the employees gave the excuse that the person who is responsible closed it as "no one was coming anyway" :)

Vinod
Title: Re: WMT - Walmart Inc
Post by: ccplz on November 01, 2015, 12:42:53 PM
Last year, 56% of Walmart's revenues came from groceries. Do people buy groceries online? Is it even possible?
Title: Re: WMT - Walmart Inc
Post by: rb on November 01, 2015, 12:44:24 PM
They do have online grocery in certain large cities.
Title: Re: WMT - Walmart Inc
Post by: krazeenyc on November 01, 2015, 04:26:58 PM
Last year, 56% of Amazon's revenues came from groceries. Do people buy groceries online? Is it even possible?

source please. this is not accurate.
Title: Re: WMT - Walmart Inc
Post by: ccplz on November 01, 2015, 04:34:40 PM
Last year, 56% of Amazon's revenues came from groceries. Do people buy groceries online? Is it even possible?

source please. this is not accurate.

WMT 2015 10-K p.10

"The percentage of net sales for the Walmart U.S. segment, including online sales, represented by each strategic merchandise unit was as follows for fiscal 2015, 2014 and 2013:... Groceries: 56%"

http://www.sec.gov/Archives/edgar/data/104169/000010416915000011/wmtform10-kx13115.htm

???
Title: Re: WMT - Walmart Inc
Post by: sampr01 on November 01, 2015, 04:38:45 PM
Last year, 56% of Amazon's revenues came from groceries. Do people buy groceries online? Is it even possible?

source please. this is not accurate.

WMT 2015 10-K p.10

"The percentage of net sales for the Walmart U.S. segment, including online sales, represented by each strategic merchandise unit was as follows for fiscal 2015, 2014 and 2013:... Groceries: 56%"

http://www.sec.gov/Archives/edgar/data/104169/000010416915000011/wmtform10-kx13115.htm

???

Thats Walmarts revenue NOT amazon's?. You indicated 56% OF AMAZON revenue from Grocereis
Title: Re: WMT - Walmart Inc
Post by: ccplz on November 01, 2015, 04:44:29 PM
That was obviously a typo.

It's fixed now.

Title: Re: WMT - Walmart Inc
Post by: rkbabang on November 02, 2015, 06:08:33 AM
Last year, 56% of Walmart's revenues came from groceries. Do people buy groceries online? Is it even possible?

Do people really buy groceries from Walmart?   Go into your nearest Walmart and look at the groceries, really look at them, or even try to do your shopping there.  Unless your local Walmart is VERY different from mine, what you will see is disgusting.  The meats are gross and the produce is worse.  I ran into a Walmart on the way home once to buy a case of Corona and some limes and walked out without any limes, because I wasn't even going to put those disgusting things in my beer and certainly wasn't going to serve them to guests.  I had to drive out of my way to a grocery store.

I know that they serve the lower income demographic, but that is just one of the many trends running against them as the world gets wealthier.   Their products are sub-par (a generous understatement), their online service is terrible beyond compare, the employees!!... (it appears that they must hire people from local homeless shelters and/or insane asylums), the stores are not appealing or well kept, and their groceries (meats/produce) are inedible.  Sure all this is all fixable, but will they fix it?
Title: Re: WMT - Walmart Inc
Post by: tng on November 02, 2015, 07:09:47 AM
Last year, 56% of Walmart's revenues came from groceries. Do people buy groceries online? Is it even possible?

Do people really buy groceries from Walmart?   Go into your nearest Walmart and look at the groceries, really look at them, or even try to do your shopping there.  Unless your local Walmart is VERY different from mine, what you will see is disgusting.  The meats are gross and the produce is worse.  I ran into a Walmart on the way home once to buy a case of Corona and some limes and walked out without any limes, because I wasn't even going to put those disgusting things in my beer and certainly wasn't going to serve them to guests.  I had to drive out of my way to a grocery store.

I know that they serve the lower income demographic, but that is just one of the many trends running against them as the world gets wealthier.   Their products are sub-par (a generous understatement), their online service is terrible beyond compare, the employees!!... (it appears that they must hire people from local homeless shelters and/or insane asylums), the stores are not appealing or well kept, and their groceries (meats/produce) are inedible.  Sure all this is all fixable, but will they fix it?

I think there are certain areas where Walmart is pretty much the only grocery store. As with all grocery stores, they need to have a ton of customers or sales buying up their inventory in order for their stuff to be fresh. If you are in a more populated area where there are multiple competing grocery stores/chains, most people won't go to Walmart for their groceries because that is not the first store that comes to mind when they need food. I live in the northeast and it doesn't seem like many people buy groceries at Walmart, but some of the Walmarts still have the grocery section.
Title: Re: WMT - Walmart Inc
Post by: rkbabang on November 02, 2015, 08:06:10 AM
Last year, 56% of Walmart's revenues came from groceries. Do people buy groceries online? Is it even possible?

Do people really buy groceries from Walmart?   Go into your nearest Walmart and look at the groceries, really look at them, or even try to do your shopping there.  Unless your local Walmart is VERY different from mine, what you will see is disgusting.  The meats are gross and the produce is worse.  I ran into a Walmart on the way home once to buy a case of Corona and some limes and walked out without any limes, because I wasn't even going to put those disgusting things in my beer and certainly wasn't going to serve them to guests.  I had to drive out of my way to a grocery store.

I know that they serve the lower income demographic, but that is just one of the many trends running against them as the world gets wealthier.   Their products are sub-par (a generous understatement), their online service is terrible beyond compare, the employees!!... (it appears that they must hire people from local homeless shelters and/or insane asylums), the stores are not appealing or well kept, and their groceries (meats/produce) are inedible.  Sure all this is all fixable, but will they fix it?

I think there are certain areas where Walmart is pretty much the only grocery store. As with all grocery stores, they need to have a ton of customers or sales buying up their inventory in order for their stuff to be fresh. If you are in a more populated area where there are multiple competing grocery stores/chains, most people won't go to Walmart for their groceries because that is not the first store that comes to mind when they need food. I live in the northeast and it doesn't seem like many people buy groceries at Walmart, but some of the Walmarts still have the grocery section.

Good points.  I live in the North East as well and there are so many better places to buy groceries, even in the lower income areas that it is hard to imagine buying food there.  But maybe things are different in rural areas.  Is there a breakdown somewhere of rural sales compared to urban/suburban sales?   This seems like another trend working against Walmart (and in Amazon's favor) as population grows, suburbia spreads, and urban areas become more dense.
Title: Re: WMT - Walmart Inc
Post by: FCharlie on November 02, 2015, 10:30:11 AM
Last year, 56% of Walmart's revenues came from groceries. Do people buy groceries online? Is it even possible?

Do people really buy groceries from Walmart?   Go into your nearest Walmart and look at the groceries, really look at them, or even try to do your shopping there.  Unless your local Walmart is VERY different from mine, what you will see is disgusting.  The meats are gross and the produce is worse.  I ran into a Walmart on the way home once to buy a case of Corona and some limes and walked out without any limes, because I wasn't even going to put those disgusting things in my beer and certainly wasn't going to serve them to guests.  I had to drive out of my way to a grocery store.

I know that they serve the lower income demographic, but that is just one of the many trends running against them as the world gets wealthier.   Their products are sub-par (a generous understatement), their online service is terrible beyond compare, the employees!!... (it appears that they must hire people from local homeless shelters and/or insane asylums), the stores are not appealing or well kept, and their groceries (meats/produce) are inedible.  Sure all this is all fixable, but will they fix it?


No disrespect intended, but if 56% of their half trillion of sales are from selling groceries, then I'd say that people really do in fact buy their groceries from Wal Mart.    Your description of the produce dept. is nothing like the Wal Mart nearest me. and regarding the world getting wealthier, I can't recall any period in history where there weren't far more poor people than wealthy people.
Title: Re: WMT - Walmart Inc
Post by: rkbabang on November 02, 2015, 10:46:54 AM
Last year, 56% of Walmart's revenues came from groceries. Do people buy groceries online? Is it even possible?

Do people really buy groceries from Walmart?   Go into your nearest Walmart and look at the groceries, really look at them, or even try to do your shopping there.  Unless your local Walmart is VERY different from mine, what you will see is disgusting.  The meats are gross and the produce is worse.  I ran into a Walmart on the way home once to buy a case of Corona and some limes and walked out without any limes, because I wasn't even going to put those disgusting things in my beer and certainly wasn't going to serve them to guests.  I had to drive out of my way to a grocery store.

I know that they serve the lower income demographic, but that is just one of the many trends running against them as the world gets wealthier.   Their products are sub-par (a generous understatement), their online service is terrible beyond compare, the employees!!... (it appears that they must hire people from local homeless shelters and/or insane asylums), the stores are not appealing or well kept, and their groceries (meats/produce) are inedible.  Sure all this is all fixable, but will they fix it?


No disrespect intended, but if 56% of their half trillion of sales are from selling groceries, then I'd say that people really do in fact buy their groceries from Wal Mart.    Your description of the produce dept. is nothing like the Wal Mart nearest me. and regarding the world getting wealthier, I can't recall any period in history where there weren't far more poor people than wealthy people.

That has always been true and still will be true world wide for a long time to come, but in the US it already isn't true and in many other 1st world countries it won't be true for very long.  There are very few poor people in the US (compared with much of the world).  You can certainly say that less than half the US population is poor.   And if I'm looking at the numbers correctly Walmart's non-US sales are only about 28% of its total sales.
Title: Re: WMT - Walmart Inc
Post by: rpadebet on November 02, 2015, 10:58:31 AM

Walmart has not really focused on Online so far and their current efforts so far have been subpar.

My question is, what competitive advantage does Amazon have when it builds its distribution centers - automated with robots as they might be, why would Walmart not be able to build them if it deems them necessary? Is there anything that Amazon does in these distribution centers that Walmart would not be able to copy? They certainly can afford it and the Walton family with 50% stake would certainly be understanding if short term results need to take a back seat to protect long term viability.

Vinod

Vinod,

Here is something to think about,
WMT's distribution centers are/were their competitive advantage with respect to other retailers. The era they have grown in and the model they followed caused them to strategically locate their distribution centers such that they could most efficiently service their customers (the big box retail stores around them). It was perfect as long as customers went to the store to shop.

Enter Amzn - their distribution centers (called fulfillment centers) were built and located strategically in this era. They located them such that they could efficiently service their customers (not retail stores but direct customers).

The location of distribution centers is key in retail as it influences what inventory you carry, how much you carry and by when you can restock if necessary. Your suppliers are plugged into these systems and for both WMT and AMZN it works perfectly given their model.

Now if WMT has to replicate AMZN locations, it would clearly be very expensive. Not only that, it would be disruptive to their existing business model with suppliers- it is a classic problem incumbents face in business. That is also why you see an effort from WMT to use their retail locations as part distribution centers for their online model.(pick up from store model)

They will have to do something like MSFT did - scrap the old unwieldy internet explorer and build a totally new browser for the new gen. This is difficult to do, but certainly possible. It would take a lot of investment and patience from investors.

My difficulty with WMT is - do you think the current management is not entrenched enough to overhaul the internet strategy? I would think you need new blood to come in to make such big changes (again like MSFT)
Title: Re: WMT - Walmart Inc
Post by: Parsad on November 02, 2015, 01:01:03 PM
Last year, 56% of Walmart's revenues came from groceries. Do people buy groceries online? Is it even possible?

Do people really buy groceries from Walmart?   Go into your nearest Walmart and look at the groceries, really look at them, or even try to do your shopping there.  Unless your local Walmart is VERY different from mine, what you will see is disgusting.  The meats are gross and the produce is worse.  I ran into a Walmart on the way home once to buy a case of Corona and some limes and walked out without any limes, because I wasn't even going to put those disgusting things in my beer and certainly wasn't going to serve them to guests.  I had to drive out of my way to a grocery store.

I know that they serve the lower income demographic, but that is just one of the many trends running against them as the world gets wealthier.   Their products are sub-par (a generous understatement), their online service is terrible beyond compare, the employees!!... (it appears that they must hire people from local homeless shelters and/or insane asylums), the stores are not appealing or well kept, and their groceries (meats/produce) are inedible.  Sure all this is all fixable, but will they fix it?


No disrespect intended, but if 56% of their half trillion of sales are from selling groceries, then I'd say that people really do in fact buy their groceries from Wal Mart.    Your description of the produce dept. is nothing like the Wal Mart nearest me. and regarding the world getting wealthier, I can't recall any period in history where there weren't far more poor people than wealthy people.

I agree.  The Walmart's in BC are very nice...no worse or better than Loblaws, Save-On-Foods or even Safeway.  The meat department is perfectly fine, although most of the meat is prepackaged, so you aren't going to get a butcher to cut it some special way for you.  It is clean and looks perfectly fine.  Not sure what Walmarts look like elsewhere, but they are just fine around here. 

Granted, on a busy weekend, the stores can become unwieldy because of the sheer number of people shopping there, but that isn't any different than Superstore/Loblaws or Costco.  They are just that busy!  Cheers!
Title: Re: WMT - Walmart Inc
Post by: Palantir on November 02, 2015, 01:30:19 PM
If WMT can replicate AMZNs competitive advantages by building out these distribution centers why have they not done so?
Title: Re: WMT - Walmart Inc
Post by: frank87 on November 02, 2015, 01:43:23 PM
If WMT can replicate AMZNs competitive advantages by building out these distribution centers why have they not done so?

It's not easy to replicate Amazon's distribution network. Amazon itself would have difficulty doing that themselves today, in spite of a decade of learning via trial and error.

Add that to the fact that WMT originally built its supply chain to support brick and mortar stores in small towns and you get a sense of just how difficult that task can be.
Title: Re: WMT - Walmart Inc
Post by: vinod1 on November 02, 2015, 02:12:47 PM

Walmart has not really focused on Online so far and their current efforts so far have been subpar.

My question is, what competitive advantage does Amazon have when it builds its distribution centers - automated with robots as they might be, why would Walmart not be able to build them if it deems them necessary? Is there anything that Amazon does in these distribution centers that Walmart would not be able to copy? They certainly can afford it and the Walton family with 50% stake would certainly be understanding if short term results need to take a back seat to protect long term viability.

Vinod

Vinod,

Here is something to think about,
WMT's distribution centers are/were their competitive advantage with respect to other retailers. The era they have grown in and the model they followed caused them to strategically locate their distribution centers such that they could most efficiently service their customers (the big box retail stores around them). It was perfect as long as customers went to the store to shop.

Enter Amzn - their distribution centers (called fulfillment centers) were built and located strategically in this era. They located them such that they could efficiently service their customers (not retail stores but direct customers).

The location of distribution centers is key in retail as it influences what inventory you carry, how much you carry and by when you can restock if necessary. Your suppliers are plugged into these systems and for both WMT and AMZN it works perfectly given their model.

Now if WMT has to replicate AMZN locations, it would clearly be very expensive. Not only that, it would be disruptive to their existing business model with suppliers- it is a classic problem incumbents face in business. That is also why you see an effort from WMT to use their retail locations as part distribution centers for their online model.(pick up from store model)

They will have to do something like MSFT did - scrap the old unwieldy internet explorer and build a totally new browser for the new gen. This is difficult to do, but certainly possible. It would take a lot of investment and patience from investors.

My difficulty with WMT is - do you think the current management is not entrenched enough to overhaul the internet strategy? I would think you need new blood to come in to make such big changes (again like MSFT)

rpadebet,

I do understand the key role of distribution centers and its historical importance in Walmart's growth and competitive advantage. But that is only part of the story. It has also cut a lot of waste in the whole distribution system.

Retailers have historically added a multitude of additional costs and charged these to suppliers. These take the form of display fees, rebates, handling charges, damage allowances, etc. These additional costs have been passed on to the consumers and the resulting revenue allowed retailers to ignore inefficient processes. Walmart has a one price policy that cuts all incentives for wastage in the supply chain. Walmart partners with its suppliers to cut out many inefficiencies in this process - this is an ongoing cycle. Sort of like say 3G.

Walmart already has relationships with suppliers and  their business processes are intertwined to reduce costs. Granted this is optimized for brick and mortar. But it does have scale and it is frequently the largest buyer of many of these suppliers so it gives them a leg up over competitors when it needs them to make changes.

Why is Walmart disadvantaged in building separate fulfillment centers to ship directly to customers if the economics made sense rather than using its stores? How is this going to be disruptive to suppliers? They would just ship both to existing warehouses and to these new warehouses (fulfillment centers) as well.

It is using current B&M stores as it might be cost effective/competitive for all we know.

If it makes sense to use fulfillment centers and they confer some competitive advantage to those using them, what would stop Walmart from building them? I am trying to understand if Amazon has some real advantages in building these that Walmart might not be able to replicate? Expensive is not really an issue with Walmart's resources.

They seem to be now focusing on eCommerce finally as they seem to have woken up to the risk from Amazon.

Vinod
Title: Re: WMT - Walmart Inc
Post by: Schwab711 on November 02, 2015, 02:15:40 PM
AMZN receives a fairly large hidden subsidy from Congress through USPS, which delivers packages at a loss. If Congress allowed USPS to operate completely independently then prices for shipping would go up and AMZN would lose quite a bit of their advantage. USPS shipping prices are generally much lower than FedEx/UPS even though they have operating losses.

http://www.wsj.com/articles/u-s-mail-does-the-trick-for-fedex-ups-1407182247

It's not fair for tax payers to subsidize AMZN's business expenses.
Title: Re: WMT - Walmart Inc
Post by: vinod1 on November 02, 2015, 02:21:19 PM
AMZN receives a fairly large hidden subsidy from Congress through USPS, which delivers packages at a loss. If Congress allowed USPS to operate completely independently then prices for shipping would go up and AMZN would lose quite a bit of their advantage. USPS shipping prices are generally much lower than FedEx/UPS even though they have operating losses.

http://www.wsj.com/articles/u-s-mail-does-the-trick-for-fedex-ups-1407182247

It's not fair for tax payers to subsidize AMZN's business expenses.

Is there anything that prohibits Walmart or other companies from using USPS as well?

Vinod
Title: Re: WMT - Walmart Inc
Post by: Schwab711 on November 02, 2015, 02:24:35 PM
AMZN receives a fairly large hidden subsidy from Congress through USPS, which delivers packages at a loss. If Congress allowed USPS to operate completely independently then prices for shipping would go up and AMZN would lose quite a bit of their advantage. USPS shipping prices are generally much lower than FedEx/UPS even though they have operating losses.

http://www.wsj.com/articles/u-s-mail-does-the-trick-for-fedex-ups-1407182247

It's not fair for tax payers to subsidize AMZN's business expenses.

Is there anything that prohibits Walmart or other companies from using USPS as well?

Vinod

There business is geared towards B&M. WMT is also taking advantage of this but 100% of AMZN's sales benefit from this.
Title: Re: WMT - Walmart Inc
Post by: vinod1 on November 02, 2015, 02:43:55 PM
AMZN receives a fairly large hidden subsidy from Congress through USPS, which delivers packages at a loss. If Congress allowed USPS to operate completely independently then prices for shipping would go up and AMZN would lose quite a bit of their advantage. USPS shipping prices are generally much lower than FedEx/UPS even though they have operating losses.

http://www.wsj.com/articles/u-s-mail-does-the-trick-for-fedex-ups-1407182247

It's not fair for tax payers to subsidize AMZN's business expenses.

Is there anything that prohibits Walmart or other companies from using USPS as well?

Vinod

There business is geared towards B&M. WMT is also taking advantage of this but 100% of AMZN's sales benefit from this.

Thanks!
Title: Re: WMT - Walmart Inc
Post by: rkbabang on November 02, 2015, 03:54:33 PM
AMZN receives a fairly large hidden subsidy from Congress through USPS, which delivers packages at a loss. If Congress allowed USPS to operate completely independently then prices for shipping would go up and AMZN would lose quite a bit of their advantage. USPS shipping prices are generally much lower than FedEx/UPS even though they have operating losses.

http://www.wsj.com/articles/u-s-mail-does-the-trick-for-fedex-ups-1407182247

It's not fair for tax payers to subsidize AMZN's business expenses.

Is there anything that prohibits Walmart or other companies from using USPS as well?

Vinod

There business is geared towards B&M. WMT is also taking advantage of this but 100% of AMZN's sales benefit from this.

Some percentage certainly benifits, but it isn't 100%. I've been a prime member for a long time, 7 years I think, and I have packages coming to my house 3-6 times per week. I can count the times they have came by USPS rather than UPS on one hand.  Besides the two times I've received Sunday deliveries by USPS this year, I can't remember the last time an Amazon package wasn't shipped UPS to me. Maybe it is location dependent or something, but it is proof that Amazon isn't taking advantage of the subsidized shipping for 100% of their business.
Title: Re: WMT - Walmart Inc
Post by: fareastwarriors on November 16, 2015, 08:48:27 AM
Berkshire sold some Walmart during the quarter. I was hoping he added more. Maybe next quarter?
Title: Re: WMT - Walmart Inc
Post by: ritrading on November 16, 2015, 09:11:15 AM
AMZN receives a fairly large hidden subsidy from Congress through USPS, which delivers packages at a loss. If Congress allowed USPS to operate completely independently then prices for shipping would go up and AMZN would lose quite a bit of their advantage. USPS shipping prices are generally much lower than FedEx/UPS even though they have operating losses.

http://www.wsj.com/articles/u-s-mail-does-the-trick-for-fedex-ups-1407182247

It's not fair for tax payers to subsidize AMZN's business expenses.

Is there anything that prohibits Walmart or other companies from using USPS as well?

Vinod

There business is geared towards B&M. WMT is also taking advantage of this but 100% of AMZN's sales benefit from this.

Some percentage certainly benifits, but it isn't 100%. I've been a prime member for a long time, 7 years I think, and I have packages coming to my house 3-6 times per week. I can count the times they have came by USPS rather than UPS on one hand.  Besides the two times I've received Sunday deliveries by USPS this year, I can't remember the last time an Amazon package wasn't shipped UPS to me. Maybe it is location dependent or something, but it is proof that Amazon isn't taking advantage of the subsidized shipping for 100% of their business.

Just wanted to add that many packages are delivered using multiple carriers per package. I found this information in the Fedex and UPS 10-K's. FDX and UPS will often deliver to a USPS location. Then, USPS will deliver to the buyer. I made the conclusion that FDX and UPS are more efficient with moving big packages over longer distances, but USPS is more efficient in delivering packages within short distances. This makes sense since postal workers work the same route every day, so there's a sunk cost in having them visit all homes on any given day.

Also, I not sure if USPS if there is really a big subsidy for Amazon. USPS's mail segment is unprofitable, but their package segment is profitable. I suppose you could argue that their unprofitable mail segment makes their package segment more profitable.
Title: Re: WMT - Walmart Inc
Post by: RadMan24 on November 16, 2015, 05:46:59 PM
Berkshire sold some Walmart during the quarter. I was hoping he added more. Maybe next quarter?

On CNBC said he sold to buy PCP. He also trimmed GS. So, he is just allocating capital.. Makes sense.
Title: Re: WMT - Walmart Inc
Post by: Simple Investor on November 17, 2015, 07:53:42 AM
I think the quarter looked good.  Same store comps continue to increase.  Obviously increased wages and costs impacting the bottom line.   
Title: Re: WMT - Walmart Inc
Post by: plato1976 on December 31, 2016, 01:10:41 PM
I am thinking the only "customer" of those big boxes is walmart itself
so if walmart goes down in its retailer business who's going to rent those big boxes and hence what's the real value of these real estate?

I mentioned this to someone else but if WMT trades for 10x, they can start creating a REIT at a 5-6% cap rate versus the 10% earnings yield the stock trades for.  900mm square feet of real estate gives them a lot of protection.

Anyway who knows if they do it or not but those assets are real and you can unlock them if necessary.
Title: Re: WMT - Walmart Inc
Post by: Picasso on December 31, 2016, 02:40:53 PM
Ah older thread.

Just for fun and giggles

Oct 29th 2015 AMZN: $660 = 13%
Oct 29th 2015 WMT: $59 + $2 dividends = 20%

WMT shows pretty consistent SSS and homes around new WMT locations still go up in value, so I don't know if the WMT retailer going down the tubes scenario will happen that quickly.  I have a friend who signed a long-term lease with WMT at one of their "neighborhood" formats.  When he's prodded potential buyers of the property, it always ended up with interest at ultra low cap rates.  On par with a WBA or CVS store.

It's one of those weird things where the public market is maybe more fearful than the private markets.  I bet if you had a handful of solid properties leased out to WMT (suburbs that center around their stores), you wouldn't lose any sleep at night and bankers would be knocking at your door to lend against them to buy other properties.  But in the public market everyone is worried about giant AMZN blimps sending down drones packed with toilet paper and pampers. 

But to your point there might not be much other use to these WMT locations.  I haven't thought about it too much because there doesn't seem like a lot of money to be made here.
Title: Re: WMT - Walmart Inc
Post by: bizaro86 on January 01, 2017, 07:29:03 AM
In fairness, your friend the landlord is higher in the capital structure than WMT equity holders. I don't think too many folks would argue WMT is going bankrupt, so a lease should almost certainly be money good.

If Amazon keeps taking share, a lot of other competitive retailers will go down first (Sears/kmart/jc penny etc) which would help Walmart as well.
Title: Re: WMT - Walmart Inc
Post by: Picasso on January 01, 2017, 07:51:29 AM
Right, I was referring to WMT forming some kind of REIT vehicle. Although I doubt it would ever happen.
Title: Re: WMT - Walmart Inc
Post by: longinvestor on May 28, 2017, 12:37:00 PM

Walmart has not really focused on Online so far and their current efforts so far have been subpar.

My question is, what competitive advantage does Amazon have when it builds its distribution centers - automated with robots as they might be, why would Walmart not be able to build them if it deems them necessary? Is there anything that Amazon does in these distribution centers that Walmart would not be able to copy? They certainly can afford it and the Walton family with 50% stake would certainly be understanding if short term results need to take a back seat to protect long term viability.

Vinod

Vinod,

Here is something to think about,
WMT's distribution centers are/were their competitive advantage with respect to other retailers. The era they have grown in and the model they followed caused them to strategically locate their distribution centers such that they could most efficiently service their customers (the big box retail stores around them). It was perfect as long as customers went to the store to shop.

Enter Amzn - their distribution centers (called fulfillment centers) were built and located strategically in this era. They located them such that they could efficiently service their customers (not retail stores but direct customers).

The location of distribution centers is key in retail as it influences what inventory you carry, how much you carry and by when you can restock if necessary. Your suppliers are plugged into these systems and for both WMT and AMZN it works perfectly given their model.

Now if WMT has to replicate AMZN locations, it would clearly be very expensive. Not only that, it would be disruptive to their existing business model with suppliers- it is a classic problem incumbents face in business. That is also why you see an effort from WMT to use their retail locations as part distribution centers for their online model.(pick up from store model)

They will have to do something like MSFT did - scrap the old unwieldy internet explorer and build a totally new browser for the new gen. This is difficult to do, but certainly possible. It would take a lot of investment and patience from investors.

My difficulty with WMT is - do you think the current management is not entrenched enough to overhaul the internet strategy? I would think you need new blood to come in to make such big changes (again like MSFT)

rpadebet,

I do understand the key role of distribution centers and its historical importance in Walmart's growth and competitive advantage. But that is only part of the story. It has also cut a lot of waste in the whole distribution system.

Retailers have historically added a multitude of additional costs and charged these to suppliers. These take the form of display fees, rebates, handling charges, damage allowances, etc. These additional costs have been passed on to the consumers and the resulting revenue allowed retailers to ignore inefficient processes. Walmart has a one price policy that cuts all incentives for wastage in the supply chain. Walmart partners with its suppliers to cut out many inefficiencies in this process - this is an ongoing cycle. Sort of like say 3G.

Walmart already has relationships with suppliers and  their business processes are intertwined to reduce costs. Granted this is optimized for brick and mortar. But it does have scale and it is frequently the largest buyer of many of these suppliers so it gives them a leg up over competitors when it needs them to make changes.

Why is Walmart disadvantaged in building separate fulfillment centers to ship directly to customers if the economics made sense rather than using its stores? How is this going to be disruptive to suppliers? They would just ship both to existing warehouses and to these new warehouses (fulfillment centers) as well.

It is using current B&M stores as it might be cost effective/competitive for all we know.

If it makes sense to use fulfillment centers and they confer some competitive advantage to those using them, what would stop Walmart from building them? I am trying to understand if Amazon has some real advantages in building these that Walmart might not be able to replicate? Expensive is not really an issue with Walmart's resources.

They seem to be now focusing on eCommerce finally as they seem to have woken up to the risk from Amazon.

Vinod

Well here we are, 2 years later. Today I picked up my first grocery order-online-pickup-at store. First experience was very good. The ordering, pick up scheduling, notifying that I was there, loading the car by the Walmart attendant were all professional and no surprises.

The delighters,

- Literally no wait time. I had notified them on the phone 15 minutes before reaching and as I pulled up to the numbered space, they came out. 
- A mental barrier I (surely others have) had ordering online: Buying Bananas, tomatoes, bread and eggs. The m.o is that they show you these items before loading in the car. They apparently looked for the same things I would. They even mentioned that I could let them know if I wanted the bananas greener or riper.
- They substituted some items for larger or smaller sizes. Ex. 7.5 Oz Coke versus 12 Oz. They don't charge more. 4 items on my list were substituted and I got more than I paid for.
- I do not like paper or plastic (or worse, cardboard that comes with Amazon orders). This time I let them do plastic but they told me that they would fill up my own cloth bags the next time at the car and recycle the plastic they do use to transfer to the car. I am somewhat Ok with this, but would really like them to keep returnable bags/ containers and eliminate all plastic. "They are thinking about that". I sense they like that the lower overall costs is shared by both!
- $30 is all that's needed for this service to be free. This is a huge delighter for us as we plan to order more frequently than we do now. We do frequently throw away stuff from the fridge. Big cause for this is that we have too much in the fridge, some things get tucked away in the back. Freshness is very likely to go up in our kitchen. Cannot beat this value and this could well be a game changer.

- How this is all going to work is that, I will plan my pick up time while returning from work or some other planned travel(no incremental gas expense); I plan to fill up gas each time at Sam's club gas, which is in the parking lot. Sam's club gas is significantly cheaper than gas stations around me. Plus I get 5% off for using their credit.

Finally, the attendant was super nice. I asked him about tips and they do have a no tip policy. All they want is for me to spread the word:-) There is a $10 reward for referrals. ($10 each).

I like cheap and nobody beats Walmart for cheap. Cheap and convenient! I'm in. Will post any + or - experiences in the future.

Any one else try this?



 
Title: Re: WMT - Walmart Inc
Post by: Parsad on May 28, 2017, 04:43:50 PM

Walmart has not really focused on Online so far and their current efforts so far have been subpar.

My question is, what competitive advantage does Amazon have when it builds its distribution centers - automated with robots as they might be, why would Walmart not be able to build them if it deems them necessary? Is there anything that Amazon does in these distribution centers that Walmart would not be able to copy? They certainly can afford it and the Walton family with 50% stake would certainly be understanding if short term results need to take a back seat to protect long term viability.

Vinod

Vinod,

Here is something to think about,
WMT's distribution centers are/were their competitive advantage with respect to other retailers. The era they have grown in and the model they followed caused them to strategically locate their distribution centers such that they could most efficiently service their customers (the big box retail stores around them). It was perfect as long as customers went to the store to shop.

Enter Amzn - their distribution centers (called fulfillment centers) were built and located strategically in this era. They located them such that they could efficiently service their customers (not retail stores but direct customers).

The location of distribution centers is key in retail as it influences what inventory you carry, how much you carry and by when you can restock if necessary. Your suppliers are plugged into these systems and for both WMT and AMZN it works perfectly given their model.

Now if WMT has to replicate AMZN locations, it would clearly be very expensive. Not only that, it would be disruptive to their existing business model with suppliers- it is a classic problem incumbents face in business. That is also why you see an effort from WMT to use their retail locations as part distribution centers for their online model.(pick up from store model)

They will have to do something like MSFT did - scrap the old unwieldy internet explorer and build a totally new browser for the new gen. This is difficult to do, but certainly possible. It would take a lot of investment and patience from investors.

My difficulty with WMT is - do you think the current management is not entrenched enough to overhaul the internet strategy? I would think you need new blood to come in to make such big changes (again like MSFT)

rpadebet,

I do understand the key role of distribution centers and its historical importance in Walmart's growth and competitive advantage. But that is only part of the story. It has also cut a lot of waste in the whole distribution system.

Retailers have historically added a multitude of additional costs and charged these to suppliers. These take the form of display fees, rebates, handling charges, damage allowances, etc. These additional costs have been passed on to the consumers and the resulting revenue allowed retailers to ignore inefficient processes. Walmart has a one price policy that cuts all incentives for wastage in the supply chain. Walmart partners with its suppliers to cut out many inefficiencies in this process - this is an ongoing cycle. Sort of like say 3G.

Walmart already has relationships with suppliers and  their business processes are intertwined to reduce costs. Granted this is optimized for brick and mortar. But it does have scale and it is frequently the largest buyer of many of these suppliers so it gives them a leg up over competitors when it needs them to make changes.

Why is Walmart disadvantaged in building separate fulfillment centers to ship directly to customers if the economics made sense rather than using its stores? How is this going to be disruptive to suppliers? They would just ship both to existing warehouses and to these new warehouses (fulfillment centers) as well.

It is using current B&M stores as it might be cost effective/competitive for all we know.

If it makes sense to use fulfillment centers and they confer some competitive advantage to those using them, what would stop Walmart from building them? I am trying to understand if Amazon has some real advantages in building these that Walmart might not be able to replicate? Expensive is not really an issue with Walmart's resources.

They seem to be now focusing on eCommerce finally as they seem to have woken up to the risk from Amazon.

Vinod

Well here we are, 2 years later. Today I picked up my first grocery order-online-pickup-at store. First experience was very good. The ordering, pick up scheduling, notifying that I was there, loading the car by the Walmart attendant were all professional and no surprises.

The delighters,

- Literally no wait time. I had notified them on the phone 15 minutes before reaching and as I pulled up to the numbered space, they came out. 
- A mental barrier I (surely others have) had ordering online: Buying Bananas, tomatoes, bread and eggs. The m.o is that they show you these items before loading in the car. They apparently looked for the same things I would. They even mentioned that I could let them know if I wanted the bananas greener or riper.
- They substituted some items for larger or smaller sizes. Ex. 7.5 Oz Coke versus 12 Oz. They don't charge more. 4 items on my list were substituted and I got more than I paid for.
- I do not like paper or plastic (or worse, cardboard that comes with Amazon orders). This time I let them do plastic but they told me that they would fill up my own cloth bags the next time at the car and recycle the plastic they do use to transfer to the car. I am somewhat Ok with this, but would really like them to keep returnable bags/ containers and eliminate all plastic. "They are thinking about that". I sense they like that the lower overall costs is shared by both!
- $30 is all that's needed for this service to be free. This is a huge delighter for us as we plan to order more frequently than we do now. We do frequently throw away stuff from the fridge. Big cause for this is that we have too much in the fridge, some things get tucked away in the back. Freshness is very likely to go up in our kitchen. Cannot beat this value and this could well be a game changer.

- How this is all going to work is that, I will plan my pick up time while returning from work or some other planned travel(no incremental gas expense); I plan to fill up gas each time at Sam's club gas, which is in the parking lot. Sam's club gas is significantly cheaper than gas stations around me. Plus I get 5% off for using their credit.

Finally, the attendant was super nice. I asked him about tips and they do have a no tip policy. All they want is for me to spread the word:-) There is a $10 reward for referrals. ($10 each).

I like cheap and nobody beats Walmart for cheap. Cheap and convenient! I'm in. Will post any + or - experiences in the future.

Any one else try this?

In Vancouver, I use the online order and delivery service of Save-on Foods, owned by Jimmy Pattison's company...roughly for the last 2 years.  They deliver right to the door, during a 2-hr time slot I select on any given day.  We also use it for all food/kitchen delivery for Premier's office.  Excellent service, delivery and rarely a problem...which is corrected right away.  Walmart is a bit cheaper, so if they started to provide pick-up service here, I would probably also use it.  The problem is that the parking lot for Walmart, and it's primary competitor Loblaw's Real Canadian Superstore, is always jam-packed.  So I don't mind paying a little bit more and a small delivery fee to have it brought right to our kitchen.  I only go to the grocery store now if I'm doing something like barbecuing or something, or if guests are coming over, and I need to grab a few last minute items.  Never thought I would use online grocery delivery 3-5 years ago.  Cheers!
Title: Re: WMT - Walmart Inc
Post by: longinvestor on May 28, 2017, 05:25:42 PM
Sanjeev,
Agree that it's amazing how much the world has changed.

I've used Peapod.com some years back. My conclusion was they priced (too high)for convenience and found that they didn't get the fresh produce business right. That's a big sliceof our needs. We gave up on them. I'm cheap, that was most of it.
Title: Re: WMT - Walmart Inc
Post by: rb on May 28, 2017, 07:40:23 PM
This may be a Canada vs US thing but outside of books I don't generally find Amazon cheap. If I'm looking to buy something I can find it at other places at same price or cheaper than Amazon. Very seldom Amazon is the low price. On the other hand Walmart is the low price a lot of times.

I don't buy a lot of groceries from Walmart because they're not as price competitive in Canada as in the US and the quality is not too good and I'll probably never buy produce online. But for packaged goods I suspect their model should work pretty well if they can keep the price down.
Title: Re: WMT - Walmart Inc
Post by: longinvestor on May 28, 2017, 08:57:02 PM
This may be a Canada vs US thing but outside of books I don't generally find Amazon cheap. If I'm looking to buy something I can find it at other places at same price or cheaper than Amazon. Very seldom Amazon is the low price. On the other hand Walmart is the low price a lot of times.

I don't buy a lot of groceries from Walmart because they're not as price competitive in Canada as in the US and the quality is not too good and I'll probably never buy produce online. But for packaged goods I suspect their model should work pretty well if they can keep the price down.

I did a price comparison of everything I bought over the past 6 months on Amazon.com and interestingly every single item is available on Walmart.com.

And not a single item was priced higher than Amazon. Most were identical, a few lower. Some significantly lower. I've seen enough.

Next I will look back in my purchase history for about 3 years and if most items available on Walmart.com, this will be the last year of paying the Prime membership. 
Title: Re: WMT - Walmart Inc
Post by: rb on May 28, 2017, 09:12:31 PM
interestingly enough, despite Amazon being the tech wizards and Walmart being the bumbling hillbillies from Arkansas, the Amazon website doesn't "feel" very good. It's not easy to browse items or find sales or promotions.
Title: Re: WMT - Walmart Inc
Post by: Charlie on May 29, 2017, 11:37:14 AM
I´m buying a lot of things at Amazon.  ;)
I think you can increase your living standard in a lot of things if you buy the products with the highest customer ratings at Amazon.
It´s a little bit like Buffett said at the annual meeting to flip with your fingers (the example of Ajit Jain and the billions of dollars he made) and the next day it´s there.
You save a lot of time, read good customer reviews, get the best products and it´s easy.
I think with big ticket items it makes sense to compare prices, because Amazon is not that cheap.
The repeat purchases are sometimes very expensive.

I have thought about buying Costco shares, because of Munger, but Buffett hasn´t bought much Costco shares and
sold Wal Mart and the threat of Amazon and a P/E of around 30.  :(
In the end the customer will do what is best for him. It´s competitive destruction at a high level.
In retail Buffett cloned Pabrai, because Pabrai said much earlier to avoid retail.  ;D
Title: Re: WMT - Walmart Inc
Post by: clutch on May 29, 2017, 12:10:47 PM
I think with big ticket items it makes sense to compare prices, because Amazon is not that cheap.

I used to think this way too, until this happened.

I bought a noise cancelling headphone from Amazon. About a year after I bought it, the headphone jack broke by an accident (one could say it was my fault). I emailed Amazon to let them know what happened and see what were my options. Amazon immediately shipped the replacement product that arrived at my place the next day.

I'm not sure this level of customer service is available to all Amazon customers (I'm a prime member). One could also argue that this kind of over-the-top customer service is actually a money-losing tactic. But at that moment I figured I'm willing to pay premiums (both prime membership and higher cost) to buy even expensive stuff on Amazon because I get peace-of-mind in case anything wrong goes with my purchase / product. By the way, I think the extremely lenient return policy at Costco (and not just the cheap prices) also helped them retain loyal members in the similar way.

Title: Re: WMT - Walmart Inc
Post by: Parsad on May 29, 2017, 05:56:46 PM
I think with big ticket items it makes sense to compare prices, because Amazon is not that cheap.

I used to think this way too, until this happened.

I bought a noise cancelling headphone from Amazon. About a year after I bought it, the headphone jack broke by an accident (one could say it was my fault). I emailed Amazon to let them know what happened and see what were my options. Amazon immediately shipped the replacement product that arrived at my place the next day.

I'm not sure this level of customer service is available to all Amazon customers (I'm a prime member). One could also argue that this kind of over-the-top customer service is actually a money-losing tactic. But at that moment I figured I'm willing to pay premiums (both prime membership and higher cost) to buy even expensive stuff on Amazon because I get peace-of-mind in case anything wrong goes with my purchase / product. By the way, I think the extremely lenient return policy at Costco (and not just the cheap prices) also helped them retain loyal members in the similar way.

You're probably correct.  Alot of stuff at Costco is actually more expensive than Walmart.  But Costco's return policy and unique offerings, while knowing you are getting incredibly competitive pricing,  justifies people paying for their memberships.  Can't be because Costco is less busy, as parking lots are as full as Walmart and their cashier lineups are longer.

People will pay for the Amazon Prime memberships because of the service, convenience and competitive pricing.  Cheers!
Title: Re: WMT - Walmart Inc
Post by: Parsad on May 29, 2017, 06:00:11 PM
This may be a Canada vs US thing but outside of books I don't generally find Amazon cheap. If I'm looking to buy something I can find it at other places at same price or cheaper than Amazon. Very seldom Amazon is the low price. On the other hand Walmart is the low price a lot of times.

I don't buy a lot of groceries from Walmart because they're not as price competitive in Canada as in the US and the quality is not too good and I'll probably never buy produce online. But for packaged goods I suspect their model should work pretty well if they can keep the price down.

I thought I would never buy online produce as well, but the staff at Save-on Foods pick exactly the same quality stuff I would.  You can also tell them how you would like any specific item...ripeness, thin cuts of deli meats, substitutions are ok, meat butchered a certain way, etc.  Delivered right to your front door or kitchen!  No lugging heavy bags to the car, home and up the stairs, or time wasted selecting everything.  I can work or play while they pack and deliver my groceries.  Cheers! 
Title: Re: WMT - Walmart Inc
Post by: DTEJD1997 on June 02, 2017, 09:39:38 PM
Hey all:

I haven't posted anything about WMT in a while now...but I've got another observation.

Even though i have a FREE membership at Sam's Club, I am itching to PAY to go back Costco.

WHY?

Many, many different reasons, but here is a new one.  One that I had suspected for quite a while but am POSITIVE about tonight.

As I am sitting here perusing the interwebs...I am snacking on a cup of hummus & pita chips...Hmmm, the hummus looks/tastes just a bit "funny".  Not funny in the "ha-ha-ha" way either...So I look at the expiration date.  Still good, but really damn close to the expiration date.  I just got this stuff less than a week ago.  These are the small, individually packed portions and not the 55 gallon "super saver drum" of hummus either.

So I think a bit and have notice several things.  Cheeze=its that I got were border line stale.  They were "close dated"...I also complained to a clerk once that Sam's club did not have the standard size Perrier water in stock.  He said, yeah, tell me about it...Who knows what corporate is doing next?  They are always looking for bargain/closeout/non-standard stuff.  This was the response of the clerk to my question.

So I very strongly suspect that Sam's Club is buying "close dated" stuff at a discount.  I don't think that Costco would ever do that.  Costco's turnover is probably better than Sam's Club too.

Counting the days till I go back...
Title: Re: WMT - Walmart Inc
Post by: Spekulatius on June 03, 2017, 09:03:08 AM
Costco certainly does not  carry closely to expiration date from groceries. The quality of Costco's groceries is high and we like their meats and veggies in particular.
Title: Re: WMT - Walmart Inc
Post by: kab60 on June 04, 2017, 12:29:47 AM
I really think this Wal-Mart initiative sounds promising: https://techcrunch.com/2017/06/01/walmart-begins-testing-using-store-staff-for-last-mile-deliveries/
Title: Re: WMT - Walmart Inc
Post by: longinvestor on June 04, 2017, 03:57:18 AM
I really think this Wal-Mart initiative sounds promising: https://techcrunch.com/2017/06/01/walmart-begins-testing-using-store-staff-for-last-mile-deliveries/
Agree, this could be a good one. Powerful incentive of making the extra buck for the employee. While keeping overall costs low. The best kind of cost saving is the cost nobody incurs. As a customer of Wal-Mart online grocery, I'm doing the same, picking up on my way home. Just needs me to plan ahead; If I'm in Wal-Mart's shoes, I'd be thinking of incentivizing customers who plan ahead with additional discounts because it makes it a lower cost of everything. Transportation from the regional warehouse, picking and who knows, allowing employees to also plan ahead (daycare etc.).
Title: Re: WMT - Walmart Inc
Post by: longinvestor on June 04, 2017, 08:42:36 PM
I have both Sam's club and COST memberships - for most things, COST and Sams prices are identical. Costco has better customer service (and also a pricier card). There are some items available in one but not the other.

I have seen items closer to expiry in Costco as well but if you search through the stack, the ones at the bottom or behind have longer expiry dates many times. If they are too close, I just don't buy them.

Hey all:

I haven't posted anything about WMT in a while now...but I've got another observation.

Even though i have a FREE membership at Sam's Club, I am itching to PAY to go back Costco.

WHY?

Many, many different reasons, but here is a new one.  One that I had suspected for quite a while but am POSITIVE about tonight.

As I am sitting here perusing the interwebs...I am snacking on a cup of hummus & pita chips...Hmmm, the hummus looks/tastes just a bit "funny".  Not funny in the "ha-ha-ha" way either...So I look at the expiration date.  Still good, but really damn close to the expiration date.  I just got this stuff less than a week ago.  These are the small, individually packed portions and not the 55 gallon "super saver drum" of hummus either.

So I think a bit and have notice several things.  Cheeze=its that I got were border line stale.  They were "close dated"...I also complained to a clerk once that Sam's club did not have the standard size Perrier water in stock.  He said, yeah, tell me about it...Who knows what corporate is doing next?  They are always looking for bargain/closeout/non-standard stuff.  This was the response of the clerk to my question.

So I very strongly suspect that Sam's Club is buying "close dated" stuff at a discount.  I don't think that Costco would ever do that.  Costco's turnover is probably better than Sam's Club too.

Counting the days till I go back...

This is the oldest trick in selling perishable goods. It has been done through the ages, on wheelbarrows to supermarkets. I believe we may be hyper sensitive to the dates that get printed on packaged goods. We need to worry more about additives that stretch out the "good until" date relative to what nature by herself would've allowed the main ingredient/s to stay fresh.
Title: Re: WMT - Walmart Inc
Post by: longinvestor on November 16, 2017, 04:01:04 PM
Wmt had a 50% jump in online sales. I see that when I go to pick up my online grocery order six months ago. Used to be 1 or 2 cars. Now there's5 to 10. Customer service is great too.!
Title: Re: WMT - Walmart Inc
Post by: longinvestor on January 29, 2018, 04:08:23 PM
https://finance.yahoo.com/news/wal-mart-sharpens-online-edge-150803822.html

Title: Re: WMT - Walmart Inc
Post by: Liberty on February 20, 2018, 07:23:42 AM
Stock down over 9% right now on Q4 results.

https://news.walmart.com/2018/02/20/walmart-us-q4-comps1-grew-26-and-walmart-us-ecommerce-sales-grew-23-walmart-us-full-year-comps1-grew-21-and-walmart-us-ecommerce-sales-grew-44-fiscal-year-2018-gaap-eps-of-328-adjusted-eps2-of-442
Title: Re: WMT - Walmart Inc
Post by: Liberty on March 15, 2018, 12:05:01 PM
"Walmart Whistle-Blower Claims Cheating in Race With Amazon"

https://www.bloomberg.com/news/articles/2018-03-15/walmart-whistle-blower-claims-retailer-cheated-to-catch-amazon
Title: Re: WMT - Walmart Inc
Post by: Liberty on April 23, 2018, 06:39:06 AM
Walmart Is Close to $12 Billion-Plus Deal for Flipkart

https://www.bloomberg.com/news/articles/2018-04-23/walmart-is-said-close-to-12-billion-plus-deal-for-flipkart
Title: Re: WMT - Walmart Inc
Post by: walkie518 on April 23, 2018, 06:53:33 AM
Walmart Is Close to $12 Billion-Plus Deal for Flipkart

https://www.bloomberg.com/news/articles/2018-04-23/walmart-is-said-close-to-12-billion-plus-deal-for-flipkart
I wonder why Amazon isn't trying to beat WMT here? Maybe WMT is grossly overpaying?
Title: Re: WMT - Walmart Inc
Post by: Liberty on April 23, 2018, 06:55:36 AM
Walmart Is Close to $12 Billion-Plus Deal for Flipkart

https://www.bloomberg.com/news/articles/2018-04-23/walmart-is-said-close-to-12-billion-plus-deal-for-flipkart
I wonder why Amazon isn't trying to beat WMT here? Maybe WMT is grossly overpaying?

Amazon tried... but it's a good sign they're staying disciplined and not going all "strategic at any price!".

Whatever AMZN isn't spending on Flipkart, they can still spend on India, and that might be a high return use for the capital.
Title: Re: WMT - Walmart Inc
Post by: JRM on April 23, 2018, 09:12:33 AM
"Whatever AMZN isn't spending on Flipkart, they can still spend on India, and that might be a high return use for the capital."

I know what you mean, but I laughed a little bit inside when you say that Amazon has a high return use for capital.

Amazon may just be trying to up the bid that Wal-Mart needs to pay in order to compete head-to-head in India.  FlipKart may have the lead in India, but Amazon is definitely a formidable opponent.  It may be a case where Amazon is trying to weaken its competition by forcing them to bid a higher price.
Title: Re: WMT - Walmart Inc
Post by: mbharadwaj on April 23, 2018, 09:13:27 AM
I used to live in India when Flipkart became popular and used to shop on Flipkart. In my visits to India over the last few years I have switched to using Amazon. They have captured a large market share from Flipkart which used to almost be a monopoly. Flipkart's customer service degraded and the site usage experience (try getting out of their mailing lists) deteriorated. I have never had a reason in the last 4-5 years to go back to Flipkart.

My 2c.
Title: Re: WMT - Walmart Inc
Post by: JRM on April 23, 2018, 09:16:03 AM
Also, I find it interesting that Napsers isn't selling their stake in FlipKart so Wal-Mart can't buy the whole company.
Title: Re: WMT - Walmart Inc
Post by: Liberty on April 23, 2018, 09:45:40 AM
I used to live in India when Flipkart became popular and used to shop on Flipkart. In my visits to India over the last few years I have switched to using Amazon. They have captured a large market share from Flipkart which used to almost be a monopoly. Flipkart's customer service degraded and the site usage experience (try getting out of their mailing lists) deteriorated. I have never had a reason in the last 4-5 years to go back to Flipkart.

My 2c.

Thanks for sharing your first-hand experience.
Title: Re: WMT - Walmart Inc
Post by: DeepSouth on April 23, 2018, 11:14:26 AM
"Whatever AMZN isn't spending on Flipkart, they can still spend on India, and that might be a high return use for the capital."

I know what you mean, but I laughed a little bit inside when you say that Amazon has a high return use for capital.

Amazon may just be trying to up the bid that Wal-Mart needs to pay in order to compete head-to-head in India.  FlipKart may have the lead in India, but Amazon is definitely a formidable opponent.  It may be a case where Amazon is trying to weaken its competition by forcing them to bid a higher price.

Why is it funny? They've created hundreds of billions in value with $27B in B/S equity.
Title: Re: WMT - Walmart Inc
Post by: Liberty on April 23, 2018, 12:43:59 PM
"Whatever AMZN isn't spending on Flipkart, they can still spend on India, and that might be a high return use for the capital."

I know what you mean, but I laughed a little bit inside when you say that Amazon has a high return use for capital.

I believe it does. It's using the high-return, mature parts of the business to finance the early-stage, still loss-making startups within the large 'conglomerate'.
Title: Re: WMT - Walmart Inc
Post by: JRM on April 23, 2018, 03:17:46 PM
The thought that immediately jumped in my mind is that they enter a new "vertical" by operating at a loss and taking out any and all incumbents.  The short term returns are sacrificed for long term market control. I remember the outrage over Wal-Mart in the 1990's killing small businesses.  Somehow Amazon gets a free pass. 
Title: Re: WMT - Walmart Inc
Post by: merkhet on April 23, 2018, 06:27:41 PM
Part of the reason Amazon isn't moving more aggressively is that it's already the second largest e-commerce operator in India. There are some concerns that a combination with Flipkart won't fly with regulators.
Title: Re: WMT - Walmart Inc
Post by: Liberty on May 09, 2018, 08:41:11 AM
Looks like they finally did it:

https://www.wsj.com/articles/walmart-agrees-to-buy-77-stake-in-flipkart-for-16-billion-1525864334

Quote
Walmart Inc.  said Wednesday it had agreed to take control of India’s largest e-commerce company, Flipkart Group, for $16 billion, the largest acquisition in the Bentonville, Ark.-based retailer’s history as it tries to fend off Amazon.com Inc.  at home and abroad.
Title: Re: WMT - Walmart Inc
Post by: longinvestor on August 16, 2018, 10:23:31 AM
WMT doing well with eCommerce. Earnings are stellar. It’s just a matter of time when they broadcast “no membership fees” to go after AMZN. Kinda like Southwest’s “bags fly free”. That one is a repeated body blow to other airlines as passengers cringe when they pay $25 and 50 at each check in.
Title: Re: WMT - Walmart Inc
Post by: glorysk87 on August 17, 2018, 07:45:26 AM
Paying 20x earnings for a low single digit top line grower that has years of margin compression ahead of them as they invest relentlessly to attack an almost trillion dollar competitor strikes me as...not great risk/reward.
Title: Re: WMT - Walmart Inc
Post by: ScottHall on August 18, 2018, 03:18:43 AM
Multiples don't matter so much if war is afoot. The question is who will win and eat the other's lunch. I don't own WMT because they let Jeff Bezos build a massive head start but am open to changing my mind.

War creates disruption and markets experiencing disruption can see large market share changes. If you believe WMT can capitalize on that by going on the aggressive against Jeff Bezos, cutting margins may not be that big of a deal depending on the narrative shift it creates.

If WMT cut margins but revenue growth accelerated to double digits, the market may not find that so horrifying in the current environment. Some would say the Walton family cutting the dividend and reinvesting in their moat would make them "Outsiders."
Title: Re: WMT - Walmart Inc
Post by: longinvestor on August 18, 2018, 08:06:29 AM
Walmart appears to be using the eCommerce by pouring more concrete into their base business. The ship-to-store option is a low overall cost strategy, it leverages their massive logistics footprint. When I'm shopping on Walmart.com, I find that they are nudging me to the pick-up-at-the-store option versus shipping to the house. The co location of Sam's Club and the gas station in the same parking lot as Wal-Mart appears to be a key advantage. Becoming increasingly a one-stop shop, I expect them to drive a strategy of attracting more essential services (Food, haircut etc.) to the premises. Nothing new, but more of it.     
Title: Re: WMT - Walmart Inc
Post by: JRM on August 18, 2018, 08:19:29 AM
60% of the U.S. population lives within 5 miles 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.
Title: Re: WMT - Walmart Inc
Post by: longinvestor on August 18, 2018, 08:40:57 AM
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.
Title: Re: WMT - Walmart Inc
Post by: longinvestor on August 18, 2018, 09:26:18 AM
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.
Title: Re: WMT - Walmart Inc
Post by: longinvestor on February 20, 2019, 05:26:31 PM
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.
Title: Re: WMT - Walmart Inc
Post by: Jurgis on April 17, 2019, 03:21:35 AM
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.
Title: Re: WMT - Walmart Inc
Post by: Liberty on April 25, 2019, 04:44:30 PM
https://techcrunch.com/2019/04/25/walmart-unveils-an-a-i-powered-store-of-the-future-now-open-to-the-public/
Title: Re: WMT - Walmart Inc
Post by: longinvestor on April 25, 2019, 04:56:09 PM
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.
Title: Re: WMT - Walmart Inc
Post by: longinvestor on May 14, 2019, 01:06:34 PM
Free next day shipping. My guess is that they turn the 65 shuttered Sam’s Club locations into fulfillment centers.
Title: Re: WMT - Walmart Inc
Post by: walkie518 on May 14, 2019, 03:31:03 PM
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
Title: Re: WMT - Walmart Inc
Post by: longinvestor on May 14, 2019, 04:15:19 PM
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.
 
Title: Re: WMT - Walmart Inc
Post by: dwy000 on May 14, 2019, 07:34:25 PM
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. 
Title: Re: WMT - Walmart Inc
Post by: walkie518 on May 15, 2019, 10:59:36 AM
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
Title: Re: WMT - Walmart Inc
Post by: longinvestor on May 15, 2019, 11:57:47 AM
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!
Title: Re: WMT - Walmart Inc
Post by: dwy000 on May 15, 2019, 09:52:53 PM
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.