Is Wal-Mart Stores Inc (NYSE: WMT) Past Its Prime Years?

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By Mark Michaels on August 4, 2014 Company, Consumer Staples

According to Goldman Sachs, Wal-Mart Stores Inc (NYSE: WMT) wont be seeing its prior success again anytime soon.

Retailers are switching from the discount researcher to online retailers and stores that have more focused inventories.

Goldman Sachs knocked the rating for Wal-Mart’s stock down to “Neutral” earlier last week, due to the abandonment of much of the company’s customers.

While the company is doing well in terms of sales, having done $469 billion in annual sales, but its sales have been on the way down for the past five quarters in a row. Online shopping is the discount retailer’s biggest competitors and online retailers, such as Amazon.com Inc (NASDAQ: AMZN), are attracting many of Wal-Mart’s usual customers. Customers say that they prefer e-commerce businesses like Amazon instead of Wal-Mart to purchase everyday products like groceries or hardware.

The growing e-commerce market is dwarfing Wal-Marts vast expanse of products that is available to its shoppers. Consumers are less attracted to big box stores like Wal-Mart, and now prefer to go online to look for better deals on a smaller assortment of merchandise that is available at stores like Costco Wholesale Corporation (NASDAQ: COST) and dollarstores.

Goldman Sachs recently gave Costco a Buy rating. The bank also stated that that Amazon’s entry into the sales of groceries is a significant threat to Wal-Mart and Costco.

Wal-Mart became the largest retailer in the world by advertising the lowest prices attracting shoppers to pick up extra items in addition to the item that the shopper initially intended to buy. For example, Wal-Mart wants its customers to pick up a broom or towels on a whim when they came in for a screwdriver.

However, today’s shoppers are holding back their hard earned money and avoiding frivolous spending at the store. The check Wal-Mart’s prices against stores that are based on the Internet.

According to Brian Sozzi, the CEO of Belus Capital Advisors, Wal-Mart is keenly focused on their figures week to week because their incomes haven’t been growing. Sozzi predicts a dark and unfortunate future for the discount company within the next five to ten years.

However, Wal-Mart spokesperson Randy Hargrove countered by stating that their online sales worldwide increased by more than 25% over the last two quarters. The company is also planning to open as much as 300 Neighborhood Market stores in the upcoming fiscal year. These Neighborhood Market stores are smaller locations that are meant to compete with drug stores and dollar stores.

Hargrove also stated that the company is putting investments into technology and the company’s multi platform portfolio, which will enable the company’s customers to shop with Wal-Mart on their own terms.

Wal-Mart’s New Leader

The discount retailer hoped that a new leader would bring the company’s sales out of its lackluster phase. Greg Foran, the president and CEO of Wal-Mart’s unit in Asia, was recently appointed as the head of its stores in the United States.

The company has dismissed Bill Simon, the former head of the company’s US stores.

Bill Simon will keep his position at the company until August 8^th to aid the transition of power. According to a spokesman for Wal-Mart, Simon has been meaning to abandon the company since February, when Doug McMillon was made the company’s CEO.

The company’s executive board hopes that Foran will be able to bring Wal-Mart out of its slump for the last five quarters – including declining sales and accumulating inventories.

Foran has over 35 year of experience in the retail industry. He joined the Wal-Mart company in 2011, and held the head position of the company’s unit in China, before being promoted to head of the company’s unit in all of Asia. Prior to joining Wal-Mart, Foran worked for Woolsworth in New Zeland and Australia.

According to a document filed with the Securities and Exchange Commission, Foran will receive an annual salary of $950,000. He is expected to get $4.9 million in shares, and will also receive $500,000 for returning to the United States and renouncing his status as an expatriot. Foran will also have limited use of the company’s private aircraft.