WalMart’s valuation has gone nowhere for more than 5 years (see chart here.)The equity today is worth 12% less than it was in 2003, meanwhile the Dow Jones Industrial Average (of which WalMart is a component) is up something like 25% (see chart here).  Yesterday WalMart’s executives capitulated that their business has lower growth prospects, and the equity value jumped more than 3%.  Say what?

I’ve beaten up WalMart a few times in this blog for being completely Locked In to an old Success Formula that no longer meets market requirements, allowing Target, Kohl’s, JC Penney and other competitors to eat into their growth.  Yesterday the company admitted as much saying that it would scale back plans for growth (see article here).  Instead of putting money into more stores, management would start buying back shares in order to reduce the size of the equity pool and thus hopefully raise its value.  In other words, if the company can’t make more money for investors it will reduce the investors.  Instead of growing the numerator (returns) it will decrease the denominator (investment.)  This is nothing more than financial machinations intended to hide the inability to meet growth targets.

And investors said "great."  With no return for several years on their investment they are happy to see someone buy them out, even if it’s just the company.  The move up is not an endorsement of the company’s strategy or its leadership.  It’s a sigh of relief that some investors will find it easier to get out. 

WalMart is not improving its competitive position, it is further Locking-in that position.  Instead of using its ample cash to open White Space and figure out new ways to compete WalMart is going to use its cash to reduce investors that aren’t happy with the current results.  This does not signal a new beginning, but rather just another step in the Swamp toward the eventual Whirlpool of decline.

Interestingly, in just the last week the former head of Marketing at WalMart filed court documents (see article here.)  Included are considerable allegations of insider dealing creating benefits for executives and family members of executives.  Of course, amidst all the executive scandals of the last few years its doubtful if many investors would be surprised to learn that top executives were feathering their own nest using corporate power and position.  It merely reinforces that the executives at WalMart are benefitted by doing more of what they’ve done, not trying to do anything new.  Most telling, Ms. Roehm (the fired exec) said that "WalMart decided to fire her because executives had become increasingly uncomfortable with her ideas and cultural change adn they were looking for some way to revert back to their old, price-based approach to sales without embarrassing themselves by reversing the high-provile decision they had made to hire her just nine months earlier." 

Less is not more.  WalMart is horribly Locked-in and unable to meet changing market requirements.  It’s growth options are slowing.  It is Defending its old Success Formula with firings, lawsuits and financial machinations.  All signs of a company heading toward the Whirlpool.  It takes time for a ship bigger than the Titanic to sink, but there’s clearly some big gaping holes emerging in the hull of WalMart.