Is Wal-Mart a Safe Financial Bet?

Wal-Mart has grown from a small "Mom and Pop" store competing against the likes of the old guard Woolworth and Montgomery Ward's to being the stand alone top retailer in the world. The transformation has not always been without struggle. Lawsuits from discrimination to harassment to wage and hour violations have kept law offices a buzz for that next big case verses Wal-Mart. Even worse, the US division has seen disappointing financial results, four quarters of declining comp, stores open at least one year, sales. So is Wal-Mart still a safe financial bet?

If you remember Wal-Mart in the days of the later part of the 20^th century, sales were strong, stock prices were splitting and investors were happy. Consumer spending was at an all time high. The "Age of Excess" was in full swing. If there was something for sale, chances are Americans were buying. Wal-Mart thought it could capitalize on overspending by making big bets on high end trends including fashion. The bet fell through and Wal-Mart suffered the consequences. The attraction of high end customers with open check books didn't consider the retail giant a source of their shopping needs. This mindset opened the doors to the likes of Target as selection was designed to be forward, "now" thinking. As a result the boom in stock prices began to hit the dreaded financial plateau.

On top of a financial plateau, senior management changes were eminent. If you don't produce positive results, Wal-Mart like other corporations, will find someone who will produce those results. Now enter the 21^st century. Top officials at the retailer were marred with corruption, the country's largest class action lawsuit was in infancy, and changes were in the wind. Bring on Eduardo Castro-Wright. Eduardo was brought to the US division after transforming the business unit in Mexico. With high hopes, Castro-Wright indeed saw positive results, but was behind some of the flaws of the company, especially the attraction of high end customers.

Now bring on another player into the game, Bill Simon. A 25 year Navy officer who indeed had stellar career prior to joining the company. Under his leadership the world saw the "creation" of the $4 prescription. Sales were starting to grow again. Stock prices were starting to dig out of stagnation. But, the "Age of Excess" had an unknown enemy waiting to strike, "The Great Recession". Every good thing must come to an end. And when the United States was faced with 10 million unemployed, mortgage failures, and financial meltdowns, Wal-Mart started to see an opening.

Americans needed Wal-Mart. Their business model fit every American, not just rural American where the roots are firmly planted. Bill Simon as Chief Operating Officer saw an opening and ran with the opportunity. Again, Wal-Mart management was changing. Lee Scott, then CEO, decided his run had come to an end. He had led the company in good and bad times. He became known as a CEO who stood for something, notably corporate sustainability. Now enter Mike Duke, former head of the company's international division, to run the company. Supported by the economic meltdown, Wal-Mart was climbing back to the top. This time management change was for the good, but a bad economy helped.

With the economic state of the US in a sort of transition, Wal-Mart is now facing a different challenge. Americans don't necessarily need the retailer as it did a year ago. This is evident by a poor showing in the US division. Stock prices have had a mixed bag of results and investors want answers. So what does Wal-Mart do? It changes management again. Eduardo Castro-Wright will now lead Global.com and global procurement and former Chief Operating Officer has been promoted to President and Chief Executive Officer of the US division.

If history repeats itself, expect another rocky stock year from the retailer. With management changes comes investor unrest. There is no conspiracy theory behind the changes, yet a need for Wal-Mart to better position itself for future growth. So my first question, is Wal-Mart a safe financial bet? My thoughts would be for investors to proceed cautiously.