The Wall Street Journal reports this morning that “retail executives and major investors say Wal-Mart, which has a market value of just under $200 billion, needs to take some significant steps to regain its status as a growth stock.” Noting that “Wal-Mart's share price this decade is off 30% compared with a gain of 24.4% in the Dow Jones Wilshire Retail Index,” the Journal suggests various scenarios:
• “Peter Sorrentino, a senior portfolio manager at Huntington Asset Advisors, which has $9 billion under management and owns 2.3 million Wal-Mart shares, says it is time for a pullback in the U.S. for the retailer. Wal-Mart has been ‘too focused on growth in units and not enough on the core business,’ Mr. Sorrentino says. ‘They lost their way.’”
• Several analysts believe that Wal-Mart should rid itself of Seiyu, the Japanese retailer in which it has a majority ownership. And, interestingly enough, there are some suggestions that a few analysts believe that Wal-Mart may be close to such a decision….though Seiyu would probably go for the equivalent of $1.16 billion, and it may be tough to find a buyer.
However, analysts also seem to feel that once Wal-Mart sells Seiyu, it should take the money and invest in one of the world’s emerging markets.
• Spinning off Sam’s Club is mentioned by analysts as an option that could generate a lot of money for Wal-Mart and raise the company’s stock price.
• “Peter Sorrentino, a senior portfolio manager at Huntington Asset Advisors, which has $9 billion under management and owns 2.3 million Wal-Mart shares, says it is time for a pullback in the U.S. for the retailer. Wal-Mart has been ‘too focused on growth in units and not enough on the core business,’ Mr. Sorrentino says. ‘They lost their way.’”
• Several analysts believe that Wal-Mart should rid itself of Seiyu, the Japanese retailer in which it has a majority ownership. And, interestingly enough, there are some suggestions that a few analysts believe that Wal-Mart may be close to such a decision….though Seiyu would probably go for the equivalent of $1.16 billion, and it may be tough to find a buyer.
However, analysts also seem to feel that once Wal-Mart sells Seiyu, it should take the money and invest in one of the world’s emerging markets.
• Spinning off Sam’s Club is mentioned by analysts as an option that could generate a lot of money for Wal-Mart and raise the company’s stock price.
- KC's View:
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The question that Wal-Mart needs to answer – and perhaps it already has, since it hasn’t done any of these things – is whether such moves would have a short-term impact but hurt the company long-term.
We are reminded of the Biblical passage:
“For what does it profit a man to gain the whole world, and forfeit his soul?” (Mark 8:36)
