Walmart Inc. (WMT) is just the worst. And I’m not just talking about the singularly miserable experience of walking around a cluttered Walmart Supercenter, surrounded by the unwashed masses; WMT stock is a chronic underperformer, with just 23% gains in the last five years vs. over 70% for the S&P 500 for the same period.
More recently, WMT has been crashing to the tune of almost 30% from its 2015 high of about $91 back in January.
The reasons for these past troubles should be obvious: a focus on low-income consumers that necessarily demands Walmart keep margins ultra-thin as it competes on price, and a nearly two-year stretch of declining same-store sales across 2013 and 2014, just to name two biggies.
So why in the world would anyone believe WMT stock has more to offer now?
Because Walmart’s top U.S. exec had a fancy clock on his wall, that’s why. And it counted down to zero just a few days ago. So, uh … problem solved!
WMT Stock – Surprise CEO Visits Can’t Fix Stores
I wish I was making this up, but the head of Walmart’s U.S. operations, Greg Foran, had a big clock counting down to Oct. 1 as a “line in the sand,” as a Bloomberg report puts it, to make the stores cleaner and more appealing to customers.
“Our customers are changing, retail is changing, and we must change,” he said in a memo. “We need to become a more agile company that can easily adapt to shifting customer demand.”
Heck, Foran has even been making surprise visits to Walmart stores to check in!
While all that is probably the right sentiment — and of course the right thing for WMT stock holders to see if they want to see revenue actually move higher — it belies a much deeper problem for Walmart than simply sprucing up its aisles.
The bottom line is that consumers see Walmart a certain way, and no short-lived campaign to clean things up can change that. After all, it’s not that consumers are simply choosing to visit a Target (TGT) or Kohl’s (KSS) because it’s better lit. There’s something skeevy about the Walmart brand to many shoppers.
And lord knows they aren’t looking for a quality shopping experience at a warehouse like Costco (COST) or the smaller and often filthier discounters like Dollar General (DG) or Dollar Tree (DLTR). It’s simply a war fought on price.
This is what happens in many consumer segments: You have a brand identity, and you are not in control of it for long.
WMT stock can try to break free of broad sentiment about its stores, but it’s an immensely challenging task to break free of that gravity.
Some may call Greg Foran’s overtures well-intentioned pushes that, while certainly not likely to succeed soon, are necessary for WMT stock to move forward a little bit at a time.
Others would simply call the “reinvention” plans naive, an unrealistic drive to shake up a retail brand that is entrenched in both its brands and its sprawling U.S. operations.
Time will tell if it’s the first or the second scenario. But in my opinion, a memo and a fancy countdown clock are not reason to think things have changed at all for WMT stock. Revenue is flat this year and projected to grow a measly 3% or less in FY2016.
The top line shows the serious challenges to the Walmart brand, and the bottom line for investors will remain how much growth WMT stock can generate in the coming quarters.
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.