Significant Issues at Walmart

Significant Issues at Walmart

Like other major retailers that cater to working-class Americans, Wal-Mart is a victim of an unstable improving economy that has benefited upper-income customers more than lower-income buyers. Income at renowned Wal-Mart stores in the United States, which accounts for sixty percent of the firm’s overall sales, has fallen for five consecutive quarters (Hall Hayes & Swinney, 2020). As a result, the amount of clients has declined for the sixth quarter in a row. The company is faced with significant issues. Foremost, the company faces price pressure. Since the economy’s recovery, more stores have begun to offer low prices, which has always been a critical component of success. As a result, Wal-Mart has had to focus primarily on price reductions. Nonetheless, low prices harm sales and margins. Sales at Wal-Mart stores across the United States that have been open for at least a year fell 0.1 percent (Bradley, 2021). Wal-Mart has recently been a fairly popular stock in the extremely unfavorable retail industry. The company’s stock price is still substantially lower than its $90.47 closing price, but it has risen significantly over the past year, up 17.45 percent (Larkin, 2022). While sales growth at Wal-Mart has been frustrating, earnings growth has been non-existent. It has experienced a decrease in income over the last year, 5.60 percent, three years indicating 10.2 percent, and five years representing 7.76 percent (Ouadjed & Mami, 2020). This key issue is likely to affect the company’s market share and growth.
The second major issue is expansion to the urban markets. Prior to the 2008 economic downturn, the company increased its market share in the most occupied metropolitan retail markets with effective store openings in Chicago, Atlanta, and other Southern cities. However, because of the economic downturn, the annual growth rate of the company’s market share began to fall precipitously in these regions. During this time, the company continued to see a decline in net U.S. overall sales and a decline in their average market share in cities with a population less than 500,000 people (Hall Hayes & Swinney, 2020). While Walmart had limited success in certain urban markets in the early 2000s, the company’s rapid expansion in these markets has remained relatively low. Walmart has increased its average grocery market share in the 25 most populous metro regions from 5.5 percent to less than 12 percent (Ouadjed & Mami, 2020). More importantly, while Walmart has an average market share of 25% in metropolitan areas with populations of less than 500,000 people, the corporation has failed to achieve this level of market share in 43 of the 50 most populous metropolitan areas in the United States (Larkin, 2022). Because the proportion of the U.S. population residing in the largest metropolitan areas improved from 44.7 percent in 1960 to 54.6 percent in 2010, the concentration of Supercenters in non-metropolitan regions is becoming a major impediment to the company’s growth. In contrast, the percentage of the US population living in non-metropolitan regions fell from 37% in 1960 to less than 17% in 2020 (Alsharari, 2021). The rapid growth of smaller metropolitan areas is partly to blame for the rural declining population. Walmart’s growth coincided to population growth in suburban areas surrounding less-populated urban centers. However, the recent downturn in smaller metropolitan areas indicates that suburban markets are not suitable for long-term growth. Because of this demographic shift, Walmart must make a concerted effort to increase its market share in major towns.
Walmart experiences a major reputation issue. Walmart’s detractors are not limited to a small group of zealous opponents. The public’s and retail customers’ perceptions of Walmart are hostile, and by some indicators, they are becoming more so. According to a recent poll conducted by the Saint Consulting Group, the least popular types of proposed development initiatives are landfills, mines, casinos, power plants, and Walmart. According to Larkin (2022), a marketing report by GSD&M marketing agency states that the public perceives Walmart as a bad corporate entity that does not treat workers well and is not acting as a model citizen of the globe. Because of their poor public image, Walmart recruited Edelman, the world’s largest public relations firm, and many big name strategists to launch a series of extensive advertisements to rebuild their national reputation (Bradley, 2021). The Harris-Nielsen Reputation Quotient, which quantifies the perceptions of the most visible public companies in the United States, is a more significant indication of a business brand. The quotient is based on interviews with over 29,000 people about various aspects of corporate public image, such as civic responsibility and workplace environment. Walmart, like the ACSI rankings, currently ranks in the bottom quartile of public corporations. Walmart received a quotient of 68 between 2015 and 2020, placing it just above the majority of finance and oil companies in the United States (Hall Hayes & Swinney, 2020). Walmart ranks relatively low when compared to other retail and grocery retail outlets. Costco (COST) and Whole Foods Market (WFM) both have typical quotients in the high 70s, which have risen steadily (Hall Hayes & Swinney, 2020). Walmart, on the other hand, has declined significantly during this time and now trades in the mid to high 60s. Walmart’s corporate reputation gap with other retailers has risen significantly over the last four years. When compared to Costco and Whole Foods Market, Walmart currently ranks 10 to 25% lower in customer satisfaction (Larkin, 2022). Ultimately, these general metrics of public image demonstrate the public relations challenge that Walmart faces as it seeks to expand into more urban markets. Walmart’s low ranking among grocery and department store customers demonstrates the need to address some of the labor practices that contribute to a critical user experience in chain stores and general stores.

Conclusion

Walmart is the globe’s leading private-sector proprietor and a retailing powerhouse. Although Wal-Mart remains a very powerful company, I believe several factors why long-term investors seeking significant capital appreciation should avoid adding Wal-Mart to their investment at this period. For years, the company’s stock has not been considered a long-standing market superior. There is a possibility that stockholders will see affirmative revenues from the stock since it is trying to obtain a significant online market share and discounters are considered prevalent among among clients. Investors should have known that Walmart’s decision to arbitrarily raise its employees’ base salary would damage the retailer’s income. In incurring $1 billion in new expenditures without any compensating increase in productivity, the company would create a revenue vacuum, sucking the air out of any gains it might have otherwise generated. The poor performance of US sales throughout the last decade raises concerns about Walmart’s long-term expansion. Previously, the corporation was overly reliant on expanding stores into suburban and rural markets to stabilize sales development in the United States. However, the demographic change toward more urban areas, as well as the oversaturation of non-urban marketplaces, has resulted in a situation in which the corporation must significantly raise its share of the largest urban retail markets in the United States in order to get back to prior rates of development. It is challenging for such a large retail company to achieve significant growth. Overall, I believe Walmart stock may not be considered as a viable investment option.

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