Wal Mart's Empty Shelves.
Wal Mart executive meeting minutes leaked to Bloomberg show
Wal Mart's management struggling with empty shelves while sales decline.
“We run out quickly and the new stuff doesn’t come in,” U.S. Chief Executive Officer Bill Simon said, according to the minutes of the Feb. 1 meeting. Simon said “self-inflicted wounds” were Wal-Mart’s “biggest risk” and that an executive vice president had been appointed to fix the restocking problem, according to the minutes.
Wal Mart must be having serious problems with its supply chain because a healthy business with a sudden sales decline would have a surplus of inventory. Wal Mart's management blamed the end of payroll tax cuts for the sudden decline in sales reported several weeks ago, but that doesn't explain the logistics problems. Moreover, Wal Mart used to see increases in sales when times got tough because middle class consumers who shopped at higher end stores would move down to Wal Mart.
I spend time in a North Carolina town that has limited shopping options so I am very familiar with Wal Mart's restocking problems. Wal Mart's older store in Jacksonville, NC has had stocking problems for months. The place looks like a dump. The store has long lines at most times of day because they don't have enough cashiers. Common items are often missing from shelves, so the excuse that Wal Mart has empty shelves because a failed attempt to go back to basics doesn't cut it.
Commenters on Bloomberg's article have made several solid points. Dollar stores now undercut Wal Mart on prices and they have shorter lines. Target has much more attractive stores and prices that compete with Walmart. It looks like Wal Mart's business model (since Sam Walton died) of screwing their employees and suppliers is finally catching up to them. ZeroHedge has a very pointed observation. There's trouble with their suppliers.
So even as the market completely ignored the Wal-Mart revenue issue, which is "getting worse", the bigger problem is that now it appears to be affecting the company's supply-chain, which likely means that all of WMT's upstream vendors are suffering from the same malaise that has gripped all those entities that still rely on such historical trivia as profitability and cash flow:
If there's trouble through their supply chain, Wal Mart's in deep trouble.
Friday morning update:
I never expected so many comments. Thanks. Comments by people who have had business dealings with Wal Mart have been very revealing. If Wal Mart has been slow to pay suppliers as several comments have suggested, those suppliers could be having cash flow problems. Wal Mart can squeeze its suppliers only so much before they fail.
Weather and local problems don't explain supply problems Bloomberg reports on in California which has had pretty good weather. Moreover, California is near the ports of entry for products made in Asia. This suggests that some of the issues may go back to problems with suppliers in China.
Evelin Cruz, a department manager at the Wal-Mart Supercenter in Pico Rivera, California, said Simon’s comments from the officers’ meeting were “dead on.”
“There are gaps where merchandise is missing,” Cruz said in a telephone interview. “We are not talking about a couple of empty shelves. This is throughout the store in every store. Some places look like they’re going out of business.”