AOTW: Business Insider: "Walmart's entire business model
is crumbling"
October 17, 2015
Good morning,
We spoke in last week’s article about the likelihood of many positive profit surprises from US
businesses, as the effects of low oil prices since the spring translate into consumer spending.
Therefore, it was initially quite surprising on Wednesday when Walmart reported a large cut to its
2017 fiscal year outlook, and its shares dropped 10% in response. Was this a portend of bad
earnings news to come? There is no greater pulse on the American consumer than Walmart, is
there? Perhaps not.
"New guidance reflects that Walmart's competitive edge — historically largely assortment and price — has faded
relative to purveyors of extreme value (warehouse clubs, hard discounters) or extreme convenience (dollar stores, hard
discounters), as e-commerce has neutralized the impact of selection," Goldman Sachs analyst Matthew Fassler wrote in
a note to clients.
As competitors like Costco, Aldi, Trader Joe's, and Family Dollar crowd the space, the idea of visiting a Walmart is
less compelling to price-conscious consumers.”
Walmart is attempting to play catch up in the eCommerce world, investing millions to try to take on
the likes of Amazon. This is yet another drag on Walmart’s profit line.
Walmart’s traditional business model of paying its workers poorly to keep costs down, and strong
arming suppliers with its size and buying power, seems to be quickly running out of runway.
“Walmart's high turnover led to complaints about customer service.”
Can the Walton family jewel reinvent itself? Time will tell.
Enjoy your fall weekend, and remember to get out and vote on Monday!
http://www.businessinsider.com/challenges-to-walmarts-business-model-2015-10
Contego Wealth Management | Raymond James Ltd.
750-45 O’Connor Street | Ottawa, ON | K1P 1A4
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P.S. General Electric posted much stronger than expected earnings on Friday, and raised its
guidance for next year. This is a very good sign for the US economy and stock market. More on the
earnings trend attached in Raymond James’ Weekly Trends.
Weekly Trends
October 16, 2015.pdf
Trevor M. Johnson, FMA
Raymond James | Financial Advisor |
Contego Wealth Management
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www.raymondjames.ca/contego
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Contego Wealth Management | Raymond James Ltd.
750-45 O’Connor Street | Ottawa, ON | K1P 1A4
 613.369.4600 | Toll Free: 1.866.552.0889 | Fax: 613.369.4699
www.raymondjames.ca/contego