Street Capitalist: Event Driven Value Investments

Great interview here. Walmart (NYSE:WMT) is known to be a data monster when it comes to retail. Insights from someone like Lee Scott could prove useful when looking at the sector and the broader economy:

Here are some brief notes:

Most distressing about today’s business climate
- at Sam’s Club, the small business owner is clearly under stress
-Many are buying supplies at a just-in-time manner instead of buying ahead due to limited credit and business down.
-Similar behavior most everywhere (UK, Mexico, Canada) except in places like Brazil, Argentina
-Manufacturers in Hong Kong are reporting sales down too, pressures across for anyone who produces for homes (towels, bed sheets, etc)
-Total less shipments, more pressure on the Chinese to find markets domestically as buyers
-Chinese government is trying to stimulate domestic consumption

What has changed at Walmart?
-Our ability to listen
-We operated under the radar, kept focused on the customers and associates
-In the 90′s, after we drew the attention of the labor bosses, we couldn’t understand why people didn’t like us. Customers liked us. The harder they pushed at us, the more we pushed back. We built barriers that assumed that people who criticized us had evil intentions.
-We just finally learned through board members to listen. We had meetings, learned about the lack of understanding these people had about Walmart and misunderstandings.
-What people really wanted was a store that looked and fit with their communities.
-It was a matter of listening to the customer.

Lessons in Business
-You can have a strong belief that you’re right and still end up being wrong

Sustainability
-We’ve never claimed to be green and we’re not.
-We’d like to get better. The things we’re doing are making a difference.
-Suppliers have eliminated waste for us (example: drug company put pills on one card rather than multiple, eliminating 2000 pounds of waste)
-This eliminates cost and waste. It is good for business.
-In this case it was the board that led management

Walmart in today’s climate
-We’re positioned to sell for less
-We operate cheaper, we don’t necessarily buy for less.
-We don’t have the scale to buy cheaper. That’s a myth
-Can we buy a truckload of a product cheaper than a person buying a case? Sure.
-If you’re buying 2 million dozen women’s tops, to get the factories, fabrics, the economics of scale may actually be disadvantageous.
-Operational advantages help lower cost. Our computer systems and logistics. Management structure, all help lower cost. Walmart doesn’t pay for management getting a glass of wine when we’re out because our customer doesn’t care about that.
-At this time, when people are compelled to spend less, we’re positioned well.

How deep is the recession? How long will it last?
-Clearly a deep recession. No idea on how long it will last.
-We had a great weekend in flat panel sales, but exercise categories were very weak.
-Blu-ray performed relatively well.
-Customers are targeted and more selective at buying.

Walmart’s business: What’s changing?
-PG and Unilever come up with an idea, all we have to do is figure out how to sell a lot of it.
-Selling has changed rapidly. The consumer as they have less time, the consumer wants the store to edit the assortment more. They don’t want to see 43 different kinds of dental floss. They just want the things that are meaningfully different that they might look for.
-When you sell for less, what you want are the most informed consumers. That way they walk in and are armed with the best information. The internet has helped in this area.