Wal-Mart Stores, Inc. (WMT) has been in a tailspin, with shares of WMT stock down over 30% in 2015 and back at levels not seen since early 2012.
There are good reasons for this pain, of course, including a miserable Walmart earnings report last week and weak forward guidance that resulted in the worst one-day drop for WMT stock in 15 years.
But, investors who think that the worst is over had better think again. Delusional CEO Doug McMillon seems to think everything is under control, mainly because Walmart has a killer turnaround strategy that hinges on brick-and-mortar stores.
“First, win with stores,” McMillon told WMT stock analysts at a recent investor conference, according to reports of the event. “We know customers love shopping in stores, and they’ll want great stores.”
Look, well-intentioned moves by Walmart to raise wages for employees were intended to improve the store experience, but only ate into already-thin margins. Furthermore, Walmart’s equally delusional head of U.S. operations has been theoretically working on a makeover of every store in America, and the result was the recent downward guidance that gutted WMT stock last week.
To top it all off, there’s a little thing called e-commerce that has been winning over consumers, fueling internet giant Amazon.com (AMZN) and eroding Walmart’s market share for years. Anyone who thinks that customers love shopping in stores — or that the vast majority of Americas truly enjoy trekking out to the asphalt jungle of suburbia just to roam the aisles at Walmart for diapers and tube socks is — needs their head examined.
Walmart was already stuck in a rut, with single-digit revenue growth for the past two or three years straight. But, rather than admit their shortcomings and seriously engage on the troubles at this retail giant, WMT management seems to be digging in under the naive notion that brick-and-mortar locations are a plus for Walmart and that a company synonymous with low prices will ever be able to compete based on a premium shopping experience.
These folks running WMT stock are delusional. And as an investor, you would be equally crazy to be caught owning shares here.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.