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Friday August 07, 2009
Wal-Mart (WMT): A 'giant without peer'
In his The Complete Investor, he explains, " Its low prices have lured more customers, while its product line-up emphasizes items seldom cut from consumer budgets, such as food and health care products." Here's his review. "Its Wal-Mart stores draw an estimated 100 million people a week, explaining why the company dominates the U.S. supermarket industry, with a better than 25% market share. The company also sells under numerous other names, including Sam’s Club. "The key to Wal-Mart’s success is its ability to keep costs and prices low, which in turn stems from its massive size: as far and away the most important customer for many of its suppliers, it wields tremendous bargaining power. 
"Its heavy reliance on cheap Chinese imports is another factor keeping prices low, as is its network of distribution centers throughout the U.S., which cut costs through increased efficiency. "In fiscal 2008, profits rose more than 5% to $13.4 billion, while in the prior five pre-recession years, growth topped 10% a year. In other words, Wal-Mart can thrive in any economic climate. "And mammoth as Wal-Mart already is, it still has room to grow. One promising area is consumer electronics. Wal-Mart plans to expand its offerings to snatch up freed market share while positioning itself for better economic times. "Health care, especially prescription drugs, is another area Wal-Mart has targeted. Since launching a generic drugs program in 2006, Wal-Mart has continued to develop its in-store pharmacies. Hundreds of generic drugs are now available for $4 monthly prescriptions or for $10 three-month prescriptions. "Recently it started offering U.S. customers the option of filling prescriptions online with free home delivery, broadening customer access and appeal. "And last fall, Wal-Mart formed a partnership with Caterpillar Inc. enabling Caterpillar employees to obtain hundreds of prescription generic drugs for free at Wal-Mart pharmacies or for a $5 co-payment at other pharmacies. "The pilot program has been successful, and Wal-Mart hopes to enter into similar arrangements with other partners. "All these efforts, though still in early stages, are thoroughly in synch with the growing national emphasis on health care cost reduction. And expansion of its pharmacies could further bolster store traffic for Wal-Mart. "Internationally, Wal-Mart has more than 3,600 stores (more than doubling in the last four years) in 15 markets, operating under various names. In its latest fiscal year, ended January 2009, nearly $100 billion in sales came from abroad, a 9% yearly increase. "And there’s room for lots more international growth, particularly in emerging markets, which are now drawing Wal-Mart’s attention. Overall, Wal-Mart is a giant without peer, and its unchallenged dominance at home and growth potential abroad make it a strong addition to Growth Portfolio." |
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