My last email on WalMart prompted a comment from Barney.  He asked my opinion of the 5-year, 10-year and 30-year prospects for Wal-Mart.  Great question, worthy of a response to all readers.

The longer out the timeline, the more bearish I am.  Strategy sees its results long-term rather than short-term, so given more time the impact becomes more evident.  Predicting share prices short-term is hard, even for stock traders and mutual fund managers.  But WalMart is definitely NOT a long-term buy-and-hold investment.

Five years out I believe Wal-Mart will be in a similar situation to today, but much more defensive about itself.  The years of external attack will wear away the veneer and some of the barbs will lead to noticable wounds.  The company will not succeed internationally, nor will the company substantially increase any new businesses.  The traditional WalMart and Sam’s Club same same stores sales will not keep up with inflation, and new store growth will diminish (as management has said they intend).  Management will waiver between investing in trying to maintain share, via ongoing lurches into price wars, and buying company equity stock in order to defend itself from investor attacks.   There will be some ups and downs for the stock price, but it will not keep up with the market.  Although WalMart will still be America’s largest retailer, it will not be competitively advantaged.

Ten years out WalMart will have taken a dramatic act, or two, to try and further Defend & Extend its Success Formula.  It will start using cash to make acquisitions, in an effort to find some "retail synergy".  It will buy into some area where it claims it can use its "core competency" in volume and supply chain to better serve customers – like furniture retailing.  It will probably try to do something dramatic on the internet, albeit more than a decade late, like purchasing NetFlix, or Amazon, in hopes of re-positioning itself.  But there will be no synergy, nor any value creation.  Just lots of confusion for investors.  And the company value will, again, not keep up with the economy or the market.  It will have become a perennial also-ran investment.

Thirty years out, WalMart is today what General Motors was in 1977.  People will talk about what once was a great company.  WalMart will be trying to use size to defend itself, but finding that impossible as better competitors match WalMart’s skills with additional benefits.

WalMart is horribly Locked-in, with no signs of a meaningful Disruption on the horizon.  Senior leadership is taking the opposite actions, buying back stock and otherwise using cash in efforts to Defend & Extend its outdated Success Formula.  WalMart is in the Swamp, and it will stay stuck in the still water until something negative happens that pulls it toward the Whirlpool.  WalMart will find lots of great retail companies there – in the Whirlpool – Woolworth’s, Montgomery Wards, S.S. Kresge, TG&Y and of course Sears and KMart.