The Best Walmart’s Stock Price Keeps Falling
Shares of Wal-Mart Stores, Inc. (NYSE: WMT) continue to struggle in 2015, down more than -33% year to date. The big box retailer continues to drive new corporate initiatives that have consumed resources and profits. Wal-Mart has more than 11,500 stores in 28 countries worldwide and employs more than 2.2 million people; 1.4 million of those workers are in the United States. In early 2015, Wal-Mart announced that it would raise the minimum wage for its workers in 2015 and again in 2016.
In addition, Wal-Mart has been frantically trying to beef up its online presence to take on one of its biggest competitors, Amazon.com.to do this, Wal-Mart has invested more resources in its e-commerce platform, testing faster shipping services and even using drones in its deliveries. While Wal-Mart’s new initiatives could prove successful and help the retailer bridge the gap with Amazon, it may take some time to reach those results.
Minimum wage hike to cost big Wal-Mart dollars
In February 2015, Wal-Mart made the shocking announcement that it planned to raise the minimum wage for its U.S. workforce. The retailer raised its minimum wage to $ 9 per hour for 2015 and announced it would raise it again to $ 10 per hour in 2016. While this should certainly help solve Wal-Mart’s high employee turnover rate, it comes at a high cost. The company estimates that the salary increase will cost an additional adicionales 1.2 billion in 2015 and $ 1.5 billion in 2016. In addition, Wal-Mart is committed to continuing to provide employees with new training that can help promote career growth. This pay increase comes after Wal-Mart employees went on strike during Black Friday 2014 in hopes of achieving a higher wage.
Wal-Mart Eyes online grocery service dominance over Amazon and Target
There is no denying the power of change that the Internet has brought to people’s lives. Having to leave home to buy electronics, cars, clothing and accessories continues to be replaced by the convenience of online shopping. Wal-Mart has been investing in this area more and more in recent years, as online sales, as a whole, continue to show massive growth. Wal-Mart continues to experiment with an online service to take on Amazon Prime, but the cost remains a big problem.
In addition, it has been well documented that Wal-Mart and Amazon are in talks with the Federal Aviation Administration (FAA) to allow commercial use of drones for their operations. However, the latest and most expensive online initiative has been to become the leader in online grocery shopping. Target, Amazon and Wal-Mart are the top companies trying to control online grocery shopping. Target is testing its online grocery initiative around Minneapolis, San Francisco and New Jersey. Amazon has been testing its AmazonFresh grocery service in areas such as Seattle, Philadelphia, Brooklyn and some California cities. Wal-Mart had been testing its service in San Jose, Denver, Alabama and Northwest Arkansas. However, the company announced that it would begin testing the service in Atlanta, Nashville, Tucson, Charlotte, Fayetteville and Colorado Springs.
Wal-Mart is seeing gains and its stock price struggle. New areas of growth have made it invest in expanding operations to meet the changing landscape, which has proven to be quite costly. For years and years, Wal-Mart was constantly disrupted by its low pay for its workers. In 2015, Wal-Mart took a big step in showing its appreciation for its workforce. While the move has been largely applauded, it will take some time for Wal-Mart to work with the new costs. In addition, online shopping remains a massive area of growth, and Amazon dominates the space. Wal-Mart is trying to take some of that part away from its competitor, but this move takes time and resources. Investors should remain patient with Wal-Mart Stores, Inc.