Walmart’s Black Swan Moment

Walmart follows a simple corporate creed: Everyday low prices. Other retailers purport to follow a version of the strategy, but Walmart exemplifies it. If something's for sale at Walmart and it's also for sale somewhere else, Walmart's price will generally be lower. That may not be the case everywhere and always, but it's the case almost everywhere and almost always, and you'll waste more money and time trying to find exceptions than if you'd just bought whatever it was you were trying to buy a

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7 thoughts on “Walmart’s Black Swan Moment

  1. Really great point about the importance of Walmart shoppers on the economy more broadly. I agree this seems pretty dire.

  2. This economic slowdown will be a very bright spotlight on the inequality gap that Mr. H. has discussed on countless occasions over the past couple of years.

  3. Walmart is NOT the lowest price on all goods. They pioneered having the lowest price on the lowest cost merchandise in a category. For example Walmart will be the lowest price on a cheaper television. But if you climb up the ladder to a more expensive brand and category within TVs, Walmart will be MORE expensive most likely. Brilliant strategy and it has paid handsome dividends for the company and its shareholders. Walmart also pioneered handing out applications for food stamps and government programs to its workers when they start to work for the company- maybe that’s better now that low wage workers are in shortage and wage rates are up- nevertheless an ugly practice. And then of course complain about its corporate taxes. But they do squeeze suppliers on cost. God help you if you supply Walmart- you are not going to work for a large profit in the longer term. If Walmart is getting squeezed, you know their business model is under pressure- and yes if they are under the gun, many other companies are going to be as well.

  4. They were caught flat footed. A few months ago they were asking suppliers to eat into their margins to gain market share. They were assuming inflation would be transitory.

  5. Walmart says it’s about low prices but it’s really about stable gross margins. Over the last 25-30 years its GMs have varied but when I last looked from one year to the next the change rarely, if ever, exceeds 1ppt. What ever happens to their costs they make price and merchandising adjustments to keep their margins as steady as they can. And unlike Sears that failed, in part because it sought to manage everything from Chicago, Walmart manages margins locally. A few years ago I read a case study concerning prices. The author created a basic grocery list and bought his list at a Walmart in Houston for something like $160~ The author then took the same list to a Walmart in Boston and had to pay $220~ to buy it. Walmart makes sure its prices are competitive locally, checking competitors every day. But it’s the margin maintenance they really seek. A 17% decline in the stock is not really merited on the current miss. I’m adding at these prices.

NEWSROOM crewneck & prints