Walmart (WMT) isn’t the worst stock you could own. Income investors will be pleased to know that the mega-retailer has boosted its dividend for 39 straight years, and the dividend yield on WMT stock sits at 2.4% today.
So end my bullish comments on Walmart stock.
Shares of WMT stock have done absolutely jack-squat for investors this year, posting gains of 0.8% year-to-date. That’s about 10 percentage points worse than the S&P 500 index, which is up 10.3% in that time.
Just so you know, this pitiful showing is par for the course for Walmart stock in recent years. WMT has trailed the benchmark S&P index handily in the last 1-, 5-, and 10-year periods, underperforming by 15%, 39% and 40%, respectively.
Over the last decade, Walmart has tried and failed to catch up to Amazon.com (AMZN) in the world of e-commerce. To understand the scope of the failure, consider that, as of May, Amazon’s online sales were more than six times higher than Walmart’s, despite the latter’s ambitious efforts to jumpstart growth through e-commerce acquisitions.
Given Amazon’s persistent encroachment on Walmart’s market share, it’s unsurprising that WMT finds itself a consistent stock market laggard. But two recent moves made by the company show just how desperately Walmart is trying to hold its ground.
Taking a Page From Alibaba (BABA)
Alibaba Group Holding Ltd (BABA), the Chinese e-commerce giant fresh off its record-setting $25 billion IPO in September, made headlines yesterday when the company’s brilliantly promoted Singles’ Day contributed to more than $9.3 billion in sales on its websites in 24 hours.
Noticing the blowout success of Alibaba’s self-created sales holiday, Walmart shamelessly announced this morning its “New Black Friday” promotion, in which Walmart will offer five days of holiday shopping deals both online and in-store in a desperate and transparent effort to capture a bigger piece of Americans’ holiday spending budget.
The second sign that Walmart stock may continue to suffer came in the form of a leaked internal memo sent to WMT marketing managers last month — a memo that made headlines in The New York Times today. According to the paper, the memo details some of Walmart’s sales problems and highlights the need for more staffers with better training:
“Sent on Oct. 2, the memo reminds managers that their No. 1 concern must be sales. For the last 18 months, Walmart’s sales have been sluggish in stores open at least a year. The memo also urges managers to reduce backup inventory to trim costs, and warns them not to exceed budgets for their stores.
Some retail analysts say these problems stem from Walmart’s failure to have enough employees in its stores to do the many chores needed, like marking down aging items, rotating milk or getting needed goods from the back room to stock shelves.”
Reportedly leaked to the Times by a “manager unhappy about understaffing,” how could anyone have confidence that Walmart’s Black Friday sales promotions will translate to success for Walmart stock if the company can’t even rotate milk correctly?
I’ll be staying far, far away from WMT stock this holiday season.
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Thankfully, John Divine held no positions in Walmart stock at the time of this writing. (He currently holds no positions in BABA or AMZN, either.) You can follow him on Twitter at @divinebizkid.
