Stung by complaints of bare shelves and poor customer service, Wal-Mart Stores Inc. (NYSE:WMT), is hiring 70,000 part-time and full-time workers and 55,000 temporary staff to help out with the holiday season. The company's problems, though, aren't going to be solved only by throwing money at them.
As the economy continues to rebound, albeit at a painfully slow rate, people are no longer interested just getting the lowest price possible that Wal-Mart promises to consumers and usually delivers. They want service too. Unfortunately, customer service has been an after-thought at best for the Bentonville, Ark. retailer for years.
Wal-Mart ranks dead last among retailers and ecommerce companies measured in the American Customer Satisfaction Index with a score of 71. Rivals Target (NYSE:TGT), Kohls (NYSE:KSS) and J.C. Penney (NYSE:JCP) were each tied with 81. So, it's imperative for Wal-Mart not just to add staff but to train them correctly.
Too often going to one's local Wal-Mart can be too much of an adventure. Merchandise is displayed in a haphazard manner. Tracking down staff can be a chore and getting assistance often is an exercise in futility. Target's shelves, on the other hand, are brightly lit and kept in order. Of course, no one is going to confuse either chain with Neiman Marcus, but Target offers a far more pleasant shopping experience. The difference is evident in the numbers.
During the latest quarter, same store sales at Minneapolis-based Target rose 1.2%. Wal-Mart, meanwhile reported a 0.3% decline in the key retail metric of the performance of stores opened at least a year. Other Wal-Mart rivals such as Kohl's and TJX (NYSE:TJX), the parent company of TJ Maxx, Marshalls and Home Goods, also reported gains in same-store sales.
The important holiday season, where retailers earn most of their profits, won't be easy. The National Retail Federation expects sales to gain 3.4% this year, down from a 4.2% increase in 2012. Polls seems to suggest that many people aren't feeling the effects of the economic recovery though many economists continue to see better times ahead. A whopping 68% of Americans feel the country is on the wrong track, according to a poll by Bloomberg News.
Wal-Mart, on paper anyway, says it puts customers first. The company's late founder Sam Walton had what he called the "Ten Foot Rule." As the company says on its website, he encouraged associates, how Wal-Mart describes employees, to take the following pledge: "I promise that whenever I come within 10 feet of a customer, I will look him in the eye, greet him and ask if I can help him."
A year ago, Wal-Mart moved its greeters from their positions outside the stores indoors to help customers find the products they want. According to the company's website, the retailer is "committed to helping our associates reach their fullest potential."
Wall Street thinks the stock, which has gained more than 11% so far this year, has more room to run. The average 52-week price target on the stock is $81.73. about 9% above where it currently trades. UBS recently initiated coverage on the stock with a "buy" and Stifel Nicolaus raised its rating to a "buy" from a hold.
Bottom Line
The rewards of owning the stock far exceed the risks. The company should see a decent holiday season if it can bring the new hires onboard quickly and, just as important, train them on how to make their stores inviting to consumers. If consumers feel financial stress, they will find Wal-Mart's low prices attractive. Those with more cash to spend may buy bigger-ticket items at the chain such as iPhones. Even rich folks like bargains.
Disclosure - Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter@jdberr and at Berr's World.
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