Rose Blumkin, the founder of the Nebraska Furniture Mart, once said: “If you have the lowest price, they will find you at the bottom of a river.” For operators that seek to compete on price, that insight is both a blessing and a curse. The low-cost operator can quickly accumulate customers when it is the cheapest guy in the neighborhood, but because there is no inherent loyalty, can also quickly lose customers when a lower-cost operator enters the scene.
Wal-Mart stock (WMT), which had traded at $63 before the 2008-2009 financial crisis, was still trading in that range five years thereafter when the stock was at $67 in 2013, before investors pushed it towards $110 (a valuation of 24x trailing earnings!) in January 2018.
For long-term Wal-Mart shareholders and those with an interest in the stock, it is worth pondering: What caused the fall and rise and partial fall again?… Read the rest of this article!