No. of Recommendations: 9
Why didn’t that effect WalMart?
Most of the dollar store woes are self inflicted, reflecting inability to perform basic retail competencies like staffing, stocking and theft prevention.
It's true that Walmart has been on a roll. Good for them. They are doing well, and (to overgeneralize), all other retailers are seeing deterioration. A part of me rather wishes I had been long them rather than (say) DG and DLTR, despite the (ahem) uncomfortable recent valuations. To be honest, had I owned Walmart recently, I would have sold long before this despite the good results--I am not one to hold meaningful positions in things sufficiently pricey that there is no rational case for a decent five year return starting from current valuation levels.
However, I have a sneaking suspicion that a certain portion of that recent undeniable business advantage is a function of this particular point in the business cycle, but that's just a speculation. (deep discount retailers tend to do poorly relative to others in the early stages of a business cycle slowdown, but tend to to much better than average retailers during the middle and later stages)
As for the dollar store problems, I tend to disagree with your comment about having only themselves to blame. Maybe the could have prepared better (overdoing self checkout seems a particularly dangerous move), but I think they are primarily a victim of broader forces, some cyclical and some perhaps not.
The whole theft thing is so overblown. "External" (non employee) theft is only typically only (say) 1/3 of shrink, and in any case shrink is lower as a percentage of US retail sales than it was in 2019, not higher. What's that reporter's adage? Three incidents make a trend.
Shrink and theft are up, sure, no argument. And there has been the newish phenomenon of organized retail theft, shelf sweeping and the like. But the overall shrink loss rate is up mainly from an unusual recent low. I think a lot of CEOs have been looking for excuses on earnings calls. If you're a CEO, would you rather pin weak results on yourself or on a Fagin?
Jim
