The world's largest retailer, which gets more than half its sales from groceries, on Thursday gave a disappointing full-year forecast. It blamed sharp cuts in food stamp benefits and higher payroll taxes that are will hit disposable income for its core customers. Wal-Mart shares fell 2.2 percent in morning trading.Walmart helped create the low-wage economy and GOP-style anti-government corporatism that is now, ironically, biting it in its ass. But there's more to the retailer's problems than austerity cuts. Fact is, its business model is increasingly an anachronism.
Cold weather and a reduction in food stamp benefits aren't the only reasons behind Wal-Mart's lowered fourth-quarter forecast.Please read below the fold for more on this story.
The big-box discounter is in need of a bricks-and-mortar makeover, analysts said. To resonate with today's shopper, Wal-Mart needs to move its stores closer to major population centers, shrink the square footage of its superstores and shutter about 100 underperforming U.S. locations, they suggest.
Indeed, look at the recent revenue trends for the retailer:
"It appears increasingly uneconomic for the customer to drive 20 to 30 miles round trip to a supercenter to save a marginal amount on consumable goods—particularly when consumables, including food, are becoming more broadly distributed," [Credit Suisse analyst Michael] Exstein said.So now analysts are demanding that Walmart start shuttering those stores in favor of smaller-footprint in-town "neighborhood market" stores. As for those increasingly decrepit concrete monstrosities outside of town?
Unfortunately, the joke's ultimately on us, or at least our local governments. The big box development model -- build on cheap land on the edge of the community with taxpayers subsidizing your hard infrastructure/transportation costs, tilting the competitive landscape in your favor in the process -- is designed to be transitory. These buildings are, unlike the miles of public pipe and asphalt that serve them, quite disposable.Lucky for Walmart, finding space for their "neighborhood markets" shouldn't be much of a problem. There is plenty of empty retail space in those downtowns they helped decimate in the first place.