Breakout

Walmart isn't going after Mom & Pop stores, but are focused on these retailers instead...

Jeff Macke
Breakout

Walmart isn't going after Mom & Pop stores, but are focused on these retailers instead...

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Walmart isn't going after Mom & Pop stores, but are focused on these retailers instead...

Walmart isn't going after Mom & Pop stores, but are focused on these retailers instead...
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Having conquered the world of big box discount retail Walmart (WMT) has set its sights on taking over dollar stores. It’s good news for consumers but not even execution is likely to move the needle for long suffering shareholders.

As is so often the case, Walmart’s problem is a function of its massive size. The company just reported $473 billion in sales over the last 12 months but that was barely as much as last year, and earnings for the holiday season actually shrunk. Wall Street has taken notice, over the last 12-months shares have barely budged despite the overall stock market gaining more than 20%.

Despite its lack of recent growth Walmart didn’t become the world’s biggest private employer by being complacent. This year it plans to open 270 – 300 smaller stores it calls Neighborhood Markets and Walmart Express. Ranging between 1/10th and 1/3rd the size of existing Supercenters the new stores are taking dead aim at traditional grocers, pharmacies and smaller footprint discounters. That’s bad news for corporations like Dollar General (DG) and CVS drugstores (CVS).

What makes the opportunity in smaller stores is the rapid growth of dollar stores. The one bright spot for Walmart investors last year was the 5% same store sales growth of the small box prototypes. While Walmart has been running to stand still over the chains like Family Dollar (FDO), Dollar General, and Dollar Tree (DLTR) have been growing like crazy and rewarding shareholders for years. Unfortunately all that growth only adds up to about 10% of the Bentonville based behemoth. To put the relative sizes in context it takes Dollar General an entire year to generate what Walmart makes in about two weeks.

Consumers will benefit from more competitive pricing for drugs, basics, and groceries. Unfortunately workers are no better off. Walmart takes all the heat for working conditions but dollar store associates make about the same hourly wage as Walmart workers and store managers often make considerably less.

Despite headlines to the contrary Walmart’s isn't targeting mythical Mom & Pop stores with it's move into small footprint stores. Walmart competes with other corporate retailers every bit as moral or amoral as Walmart itself. The discount format is based on paying employees as little as possible and offering consumers rock-bottom prices. Walmart's not going after family owned stores because they can't make any money by doing so.  It's Walmart vs. the dollar stores and so far the only clear winners are folks looking for a good deal.

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