Author Topic: WMT - Walmart Inc  (Read 60576 times)

Liberty

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Jurgis

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Re: WMT - Walmart Inc
« Reply #171 on: July 03, 2019, 08:42:39 AM »
Jet.com and Walmart.com are still different platforms, which IMO sucks for customers. I have to lookup and price any purchases on both - and yeah they have different merchandise. Not sure if they have different prices - I think they did some time ago, but perhaps they fixed that at least. I know integration is hard, but so is running two e-commerce platforms.  ::)
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longinvestor

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Re: WMT - Walmart Inc
« Reply #172 on: April 02, 2020, 05:53:53 PM »
WMT rocking! Rare stock which has actually gone up in recent times!

johnny

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Re: WMT - Walmart Inc
« Reply #173 on: April 02, 2020, 11:48:29 PM »
Hey all, bumping this thread to talk about shorting this thing.

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

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

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


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

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

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

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

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

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

4. The Internet

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

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

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

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

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

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

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

Sell WMT my bros.

Ronchong

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Re: WMT - Walmart Inc
« Reply #174 on: April 03, 2020, 02:21:33 AM »
Valid points but just a gentle reminder that valuation by itself is never a good short. I know cause I learnt this the hard way.

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

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


johnny

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Re: WMT - Walmart Inc
« Reply #175 on: April 03, 2020, 03:40:43 AM »
You're probably right I was just pissed about the $90 charge. Thanks for talking me down before open, I'm feeling much more calm now.

Cigarbutt

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Re: WMT - Walmart Inc
« Reply #176 on: April 03, 2020, 06:00:31 AM »
-The pulled demand from the future argument holds but may not completely reverse if people rebalance their budget allocation: eating out vs stay at home.
-WMT may remain unusually resistant when people figure out the true meaning of discretionary.
-Walmart stores have the potential to become community centers.
FWIW, i really like your writing (content, tone etc).

gfp

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Re: WMT - Walmart Inc
« Reply #177 on: April 03, 2020, 06:38:35 AM »
You're probably right I was just pissed about the $90 charge. Thanks for talking me down before open, I'm feeling much more calm now.

Ha - just got the same email and charge.  But they are actually delivering groceries to me.  Unfortunately 1/3 of the eggs were broken

johnny

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Re: WMT - Walmart Inc
« Reply #178 on: April 05, 2020, 07:39:35 PM »
Alright guys I'm absolutely back on my bullshit and am going to short this thing. You can't talk me out of it this time.

https://asia.nikkei.com/Business/Retail/China-s-retailers-face-hard-truth-If-you-reopen-they-won-t-come

Quote
Customer traffic is "less than half of usual levels," said a worker at a Walmart store in a Shanghai suburb late last month. Shelves in the vegetable and meat departments were well-stocked, but few shoppers passed through the aisles during the normally busy late-afternoon hours. Even with its online delivery service, "sales are not growing at all," the source said.

I'm noticing some pretty substantial traffic drop-offs at my local walmart, consistent with my theory that everybody's basements are full of paper and ecomm/delivery are taking share. Stories like this are going to push that trend forward, I think:

https://www.cnn.com/2020/04/05/business/walmart-workers-coronavirus-deaths/index.html

Quote
"We are heartbroken to learn of the passing of two associates at our Evergreen Park store, and we are mourning along with their families," an emailed statement from the company reads.

Like I said before, I think Walmart is behaving in an exemplary fashion, but this is going to cost them money and I suspect they're not going to be making it up on the backend.
« Last Edit: April 05, 2020, 08:04:17 PM by johnny »

glorysk87

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Re: WMT - Walmart Inc
« Reply #179 on: April 05, 2020, 10:08:49 PM »
Alright guys I'm absolutely back on my bullshit and am going to short this thing. You can't talk me out of it this time.

https://asia.nikkei.com/Business/Retail/China-s-retailers-face-hard-truth-If-you-reopen-they-won-t-come

Quote
Customer traffic is "less than half of usual levels," said a worker at a Walmart store in a Shanghai suburb late last month. Shelves in the vegetable and meat departments were well-stocked, but few shoppers passed through the aisles during the normally busy late-afternoon hours. Even with its online delivery service, "sales are not growing at all," the source said.

I'm noticing some pretty substantial traffic drop-offs at my local walmart, consistent with my theory that everybody's basements are full of paper and ecomm/delivery are taking share. Stories like this are going to push that trend forward, I think:

https://www.cnn.com/2020/04/05/business/walmart-workers-coronavirus-deaths/index.html

Quote
"We are heartbroken to learn of the passing of two associates at our Evergreen Park store, and we are mourning along with their families," an emailed statement from the company reads.

Like I said before, I think Walmart is behaving in an exemplary fashion, but this is going to cost them money and I suspect they're not going to be making it up on the backend.

Ahh. Nothing like investing based on a few random anecdotes.