Thursday, November 02, 2006

Hmmm, Gas falls from $3 to $2.22 and We're not blowing it all at Walmart?

The "decline" in gas prices from August to today was thought to be a source of excess cash for retailers, particularly big-box retailers like Walmart.

Walmart said today they are not going to hit their 2-4% growth targets instead posting gains of just 0.5%. "Wal-Mart saw a 0.3% increase at its namesake stores and a rise of 2% at its Sam's Club locations in October. The company said it expects flat U.S. same-store sales for November." My wife commented recently that it seems like Walmart is being run like Kodak circa 2001 - they're watching someone eat their lunch and seem befuddled by it. I agree that Walmart has past their crest and for all the talk of expansion in China/Mexico, etc., this ship has sailed.

I think the greatest problem with Walmart is their inability to think outside the box. They know only one way to drive sales - get bigger. Look at the number of supercenters serving Upstate NY. They are clearly trying to gain a larger share of every dollar spent, but at some point they exceed saturation and all the cash spent chasing growth is just going to further pinch margins.

It's been a good run Sam, but like Woolworth before you the decline of this monster of retail has begun (Pssst - if anyone has an in at Walmart I have an idea that just might spark new growth opportunities for the next 20 years).

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