arizonaguy wrote: ↑March 31st, 2023, 7:40 pm
buckguy wrote: ↑March 31st, 2023, 9:46 am
Walmart's failure to keep up with inflation with their same-store comps was buried in their last quarterly report. They had issued a "warning" before the report and then indicated better than expected performance, but it still looked they weren't making progress. They've been stagnating for years, so of course, they have some strong performers and some that aren't doing well and the reasons for each probably vary a bit from place to place. Their current script when they close stores is some sort of "review of operations" which could mean anything. Instantly going to shrink reminds of the old cunard that chains were dying because they were slow to enter the suburbs (yet had lots of stores there) or their stores weren't big enough (when the competition had plenty of similar stores). I doubt we'll see candor until they do something truly radical like sell-off bigger parts of teh business. Blaming shrink even in euphamistically described areas misses that many of those smae places have stores that have been doing fine for many years like Forman Mills in the Mid-Atlantic region. It's not just dollar stores that go where somebody like Target won't.
The thing I keep in mind about Walmart is that there was a time when they seemed tocapture a broader range of customers, even when they competed with Target and relatively solid KMarts. I lived in their territories in the late 80s and this was the case. I didn't live in their territory again untol the end of the 90s and it was evident that they were on their way to becoming the store for people without other options---the stores were neat and well stocked, but the service was non-existent and apathetic, most of the prices had no advantage over other stores (the LA Times did a systematic look at this in the '00s), and despite having more categories of merchandise, the selections often seemed limited within category. The clientele also was different--no longer fully reflective of the trading area. This was around the time that journalists began looking into their reliance on incentives, their abandonment of some communities (while not allowing new takers for their space), their strong arming of suppliers, etc. and it began to reach a point where even development-friendly juristictions didn't want their new locations anymore. Their non-food stagnation began long after and they began looking for other ways to increase profits like their ill-fated effort to enter banking.
Walmart possibily could have been a store with a somewhat different niche, but their model didn't really allow for that and if KMart had magically revived itself, their situation might have become more obvious sooner. They seem willing to make changes around teh margins--the smaller stores, adding more electronics, bringing organics into the food departments, but they haven't worked. They're about 15 years too late with online shopping---most bigboxes began accommodating this in a big way well before COVID. It will help them survive but it's probably too late to broaden their base.
Despite all the supercenters, I wouldn't be surprised if the more traditional stores with a mostly center store food operation might be their path for the future of brick and mortar, at least in places where they don't have a sizable grocery share--they have general merchandise which mostly has greater markups (esp. apparel) than food and they lose the expense of maintaining expensive refrigeration and other equipment and the expense of rotating perishable stock. Walmart is not good at localizing their operations (one reason they failed ina number of foreign countries, but likely true here), so I wonder if they would serously consider doing this---it may be that the market and efforts to cut costs on teh food side make it happen, slowly on its own.
The problem with Walmart is that by the mid 2000s (2005 or so) they essentially had stores everywhere that could support a Walmart store (due to their massive expansion in the 1990s and early 2000s) but spent the next decade 2005 - 2015 or so building and/or opening up stores in places that they had no business being because they couldn't grow organically anymore. They would open a Neighborhood Market in a space that formerly housed a supermarket. They would open supercenters in former Kmarts, Mervyn's or mall department store anchor pads. They didn't seem to care about the demographic trends of the neighborhoods they entered either, it seemed like they were just trying to cram as many stores into as many urban areas as they could. It's no surprise that it's these 2005 - 2015 stores that are failing. Walmart should've never been there in the first place but they weren't putting as much emphasis online so these were the last frontier where they could attempt to open physical stores. The Neighborhood Market concept was also borne out of the idea of getting Walmart's grocery business into areas it couldn't reach with its supercenters.
Another problem is that starting in the early 2000s the dollar stores (Dollar General and Family Dollar)rapidly spread and penetrated it's core rural areas. In many of these places, Walmart was essentially the only full line store (although one would sometimes have to drive a ways to get to a Walmart). With Dollar General and Family Dollar opening up "neighborhood" rural stores, a lot of HBA, dry goods, and mid-week grocery trips were diverted from Walmart to Dollar General or Family Dollar. Walmart realized this in the mid 2010s and tried to blunt the trend of losing this business with its Walmart Express concept which ended up being an abject failure.
There also seems to have been a lot of recent growth in the "farm and fleet" segment of retailing. These hybrid hardware / general merchandise / feed stores have to take another bite out of Walmart's traditional customer base. A former Walmart customer can now get almost everything they need at a combination of a Dollar General / Family Dollar and Rural King / Tractor Supply / etc.
While all of this was going on Walmart made the decision to try to move away from it's "Always low prices" slogan and model to the "Save money, Live better" slogan and resulting price increases as it tried to move upmarket in an attempt to reach more middle to upper middle class shoppers. This move, along with a corresponding cut in SKUs, alienated some of Walmart's working class base (and drove customers to Dollar Genera / Family Dollar as those chains were expanding). Walmart continues to try to attract these upmarket customers with Walmart+ and Walmart.com but the problem is that even before 2008 Walmart lost most of these customers to Amazon and Target and isn't obtaining them back.
I'm not ready to say that Walmart is dying. It's two largest competitors on the general merchandise side, Amazon and Target have their own issues right now. Amazon's first party retail business is not profitable, never has been profitable and has to be subsidized by other areas of Amazon's business that are now less profitable than they were before. Amazon, not Walmart, seems to be the modern day Sears and seems destined to have the same future that Sears had. Profitable parts of Amazon such as AWS will probably survive but the massive money pit of a retail operation that Amazon currently operates will look very different in the not too distant future. We're already seeing consumer unfriendly changes to try to prop up the retail business but probably will simply turn off customers from it.
Target seems to have lost its way and the recent remodels with odd product assortment / space allocations (such as the massive amount of prime space devoted to beauty at a recently renovated store near me), not to mention the fact that Target, even more so than Walmart, has invested heavily in stores in areas where shoplifting prevention and enforcement is difficult,
Walmart's other major, almost nationwide, competitor Kroger (on the food side) is in the midst of attempting to facilitate a merger that will do nothing but weaken itself. The merger will draw attention away from improvements on price, store conditions, merchandising, etc; and will likely lead to Kroger having to increase its pricing.
I believe Walmart now is pretty analogous to how Sam's Club was in 2018. It's in okay shape, it has some problems, it needs to make up for poor real estate decisions, but if it can stay the course while its major competitors deal with major issues of their own, I believe it can come out ahead. I do think Walmart needs to open some new stores in some suburban / exurban / rural areas though.