Is Walmart Cutting Themselves Too Thin?

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Walmart (NYSE:$WMT) ran into stocking issues back in 2013, leading to empty display shelves, and customers left without guidance due to lack of on-site staff.

The issue was dismissed as a result of over-reduction of employees. However, does that same issue persist now that we’re seeing the same trends in 2017?

On July 11th, Scott Mushkin and Michael Otway, analysts at Wolfe Research, wrote in a note, “While Walmart is certainly far from alone in seeing an increase in store execution challenges as finding and keeping qualified labor has become an issue in many markets, we do believe Walmart’s U.S. business is feeling the impact of self-imposed strains.”

It was June when Mushkin and Otway first noticed a reduction in Walmart’s staff in its Houston locations. This seems to correlate with previous trends, as the two analysts have noticed that shelves, primarily in the fresh food sections, were unusually bare.

However, barely a month later, Mushkin and Otway are beginning to see similar issues not only spreading into other departments but “around the country” as well.

“As Walmart tries to thread the needle of growing sales to help leverage its cost structure while also investing in the business and not see too much erosion in earnings, we can’t help but remember just a short time ago where efforts to too tightly control costs (as profits were needed to fund other endeavors i.e. e-commerce) resulted in out-of-stock challenges,” Mushkin and Otway explain.

Since their $3.3 billion dollar acquisition of Jet.com in August of last year, Walmart has shifted significant focus to developing its e-commerce presence. Most likely responding to pressure from Amazon (NASDAQ:$AMZN), Walmart has pushed its initiatives by offering discounts to customers who order online, but pickup in store, launching a two-day shipping service for those that can’t pickup, and even have its employees deliver packages directly to customer doors.

As consumers and investors catch on, Wolfe warns that Walmart must soon resolve their shelf stocking issue before sales reflect negatively.

Walmart shares rose just under 0.80% on Wednesday morning trading, to sit at about $74.06.

Featured Image: depositphotos/snyfer

About the author: Josh is currently studying for a Bachelors in Business Management Organizational Studies at Western University, Ontario. He was awarded the Western Continuing Admission Scholarship in 2015. He is scheduled to graduate in 2109. Josh has worked as a business analyst, co-founded Master Badminton, a sporting goods website, and has written financial analysis, stock market updates, and informational articles on investing.