CNN/Money reviews the troubles facing the world's largest retailer in this article about how Wal-Mart's troubles run far deeper than rising gas prices. I've copied the relevant portion of the article below.
Thre seems to be a growing group of analysts holding the opinion that Wal-Mart may have finally jumped the shark. It appears, more or less, that the company is beginning to collapse under its own weight and success - nimbler, hipper competitors are gaining the department store defectors, and dollar stores are capturing the super-cost-conscious consumer.
Wal-Mart: Becoming yesterday's story?
A case in point is Wal-Mart, which rattled Wall Street Thursday. The retailer reported higher profits but the numbers missed Wall Street forecasts, and it warned about the rest of the year, blaming higher gas prices and weather.
Wal-Mart executives have repeatedly warned that higher gas prices weigh more on its customers, most of who live paycheck to paycheck.
But some industry watchers wondered whether Wal-Mart's troubles are running deeper than a bout of gas pains.
"Starting with the recession in the mid-70's, the worse the economy got the better Wal-Mart sales would be. Now, like everybody else, Wal-Mart is using every excuse in the book to disguise company-specific problems," said Burt Flickinger, retail analyst with New York-based Strategic Resource Group.
Robert Buchanan, retail analyst at A.G. Edwards, said Wal-Mart is struggling with internal execution problems.
"Basically it's long lines and slow speed at checkout and missing some fashion (items) and not having iPods in the majority of the stores," he said.
In addition, he said, morale at the company is being hurt by a drumbeat of negative publicity about the company, such as reports that former Vice Chairman Tom Coughlin padded his expense account with up to $500,000 in improper purchases and numerous lawsuits against it by disgruntled employees.
Coughlin resigned from the company after Wal-Mart found what it said was a pattern of expense-account abuses.
"Management distractions can have a tremendous effect on a company," said Craig Johnson, retail analyst with Customer Growth Partners. "The good news is that Wal-Mart took some action and they're putting more effort into their public relations."
For starters, Wal-Mart invited the members of the media for a first-ever two-day meet-and-greet with senior executives in early April.
But that's not likely to be enough to help pull the world's largest retailer out of its funk.
"Wal-Mart has to redefine itself to consumers," said Johnson. "If the lowest price pitch is its only value proposition, that's yesterday's news." In other words, it needs to come up with something new and fresh instead of just rocking along like it's the 1980s.
Perhaps rival Target Corp. (Research), the No. 2 discounter after Wal-Mart, can provide some inspiration. Target on Thursday beat analysts' forecasts for earnings, although sales were slightly softer than estimates.
Analysts credited Target with outmerchandising and outmarketing Wal-Mart with trendy clothes and home furnishings -- both of which are higher profit categories -- as well as running savvy ads focusing on the company's Bull's eye logo.
Posted by jimj at May 12, 2005 07:55 PM | TrackBack