Bentonville, AR. Wal-Martís Worrisome Numbers
Shareholders are pouring over Wal-Mart's 2010 Annual Report, which the company has posted online.
Wal-Mart by the numbers raises a number of concerns for investors, and some reason for optimism for community groups fighting the giant retailer:
∑ Net sales at Wal-Mart this past year grew by only 1% -- the worst gain in the company's history. The company is relying on sales outside America to keep the company growing. International sales, which hit $100 billion this year, now make up roughly 25% of the company's net sales.
∑ Comparable store sales, which measures sales growth from existing stores in the current year to the same period the previous year, decreased in America by 0.8%, compared to a 3.5% increase in 2009. This is a key measure of store performance, and the numbers do not look good.
∑ Wal-Mart admits that "negative impact on comparable store sales as a result of opening new stores was approximately 0.6% in 2010, and 1.1% in 2009." In other words, when Wal-Mart opens new stores in a saturated market, they cannibalize their existing stores, and cut into their own sales. "As we continue to add new stores in the United States, we do so with an understanding that additional stores may take sales away from existing units." The good news for Wal-Mart fighters is: "With our planned slower new store growth, we expect the impact of new stores on comparable store sales to stabilize over time."
∑ Wal-Mart claims that comparable store sales were lower in fiscal 2010 "due to a decrease in average transaction size per customer driven by price deflation in certain merchandise categories." Consumers weren't buying as much each shopping trip.
∑ In 2010, Wal-Mart added only 52 new stores, or half of the 106 new stores they added in 2009, and only one-third of the 154 new stores added in 2007. Instead of opening new stores, Wal-Mart for the past couple of years has been focusing on "Project Impact" -- remodeling existing stores -- or expanding their existing discount stores into supercenters, instead of building new stores.
∑ Wal-Mart's total worldwide store count is 8,416 stores, and 952.2 million square feet of stores.
∑ By its 2011 report, Wal-Mart will have more stores outside the U.S. than inside. Counting all Wal-Marts and Sam's Clubs, the U.S. total is 4,304 stores, while the International store count is now 4,112.
∑ Wal-Mart claims that it will present something more exciting than the standard windowless big box format in the year ahead. "We have many opportunities to grow by opening new stores," the Annual Report says, "entering new markets, making acquisitions, integrating online channels, and developing new, innovative formats to allow people to experience the Wal-Mart brands."
∑ Look for growth in the U.S. to focus on urban areas: "Growth in the United States will come from additional penetration into more metropolitan markets, as well as from new formats and stronger integration with the online business."Chicago and New York City are the priority targets.
∑ Wal-Mart spent an average of $65.75 million every day over the past year on advertising. No wonder Americans are so indoctrinated with the Wal-Mart culture. Wal-Mart's advertising budget was up 14% this year.
∑ Wal-Mart's annual report was at the printers when the courts in California ruled that the huge gender discrimination case, Dukes V. Wal-Mart, could proceed as a class action lawsuit. The Annual Report notes, "If the company is not successful in its appeal of class certification, or an appellate court issues a ruling that allows for the certification of a class or classes with a different size or scope, and if there is a subsequent adverse verdict on the merits from which there is no successful appeal, or in the event of a negotiated settlement of the litigation, the resulting liability could be material to the company's financial condition or results of operations. The plaintiffs also seek punitive damages which, if awarded, could result in the payment of additional amounts material to the company's financial condition or results of operations." In other words, they could lose billions on this one case.
∑ According to the retailer's Annual Report, the company has potential future lease commitments for land and buildings for approximately 348 future locations. At its current annual rate of growth, that would be enough for the next seven years of new growth.
∑ If you don't like Wal-Mart superstores, the states with the least superstores are Hawaii (0), Vermont (0), Rhode Island (2) and Alaska, Connecticut and Delaware (5 each). If you love superstore saturation, move to Texas (298), Florida (168), Georgia (129), Ohio (124) and North Carolina (119). The saturation states also have the highest number of "dead Wal-Marts" that have been left empty.
What you can do: Wal-Mart is so obsessed with being politically correct on the "sustainability" issue, that they tell you more about the printing of their annual report than the number of dead store eyesores they have left empty.
Here is how Wal-Mart describes the print version of its Annual Report:
"It is printed on FSC-certified responsibly forested paper containing recycled PCW fiber that is Elementally Chlorine Free (ECF). It is printed using 100% renewable wind power (RECs), along with environmental manufacturing principles that were utilized in the printing process." The company claimed it saved "517 fewer trees consumed via recycling"
What Oscar Wilde said about cynics is true for Wal-Mart as well: Their sustainability counters know "the price of everything and the value of nothing."
Readers looking for more paint-by-numbers about Wal-Mart can go to walmartstores.com and click on "investors."