Should You Short Wal-Mart?

september 6, 2005

Here is an interesting article on if you should short (sell) on Wal-Mart stock. There's a lot of invester number mumbo jumbo in there, but the author basically is saying: Not yet, but it's not that great of a time to buy either. Wal-Mart stock is overvalued and is not going to grow as well as other stocks. "There are legitimate reasons to expect Wal-Mart to go higher over the short term. Just not much higher." There's one other observation that I found interesting:

Wal-Mart is becoming way too much like the old Kmart. The yellow smiley face, it seems, reminds more than a few of us of those old blue light specials, including yours truly. That's because data backs up the association. Target, for example, attracts consumers who make upwards of $20,000 more annually than your average Wal-Mart shopper. And while it's remarkably callous to say so in light of the tragedy that's befallen the southeastern United States, Wal-Mart has exactly the wrong kind of customer base to engineer a speedy recovery from the havoc Katrina has wrought. Don't get me wrong: I'm not saying storm damage will materially harm Wal-Mart. The Bentonville Behemoth takes in more than $70 billion in sales per quarter. Even the reported 123 store closings and looting will probably amount to a barely noticeable blip. I'm talking instead about the long-lasting consequences of the hurricane: higher gas prices; lost income from furloughs or, worse, layoffs; and, of course, substantial out-of-pocket costs to replace needed items. Even the president says the recovery will take years. Now, ask yourself: Who is going to have the hardest time getting back on their feet? If you're answer is lower-income workers, you're right. And where do these folks tend to shop? At Wal-Mart.
Interesting, but I think we all drew the association between Wal-Mart and the old Kmart a long time ago.