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Wal-Mart Stores, Inc. (WMT), Costco Wholesale Corporation (COST): The Most Stable, Consistent, and Ever-Growing Investment

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Retail is a bellwether industry with a lot depending on micro- and macroeconomic factors controlling the top and bottom lines. Different companies have different fates under economic pressure, but Wal-Mart Stores, Inc. (NYSE:WMT) is the name that comes to my mind when I think about a company that has come out strong against all odds.

Wal-Mart Stores, Inc. (NYSE:WMT)

Investors have realistic expectations

In the company’s last reported earnings, in May 2013, there was a lot of hush about “just” a 1% increase in sales. Comparable-store sales were more or less flat. Is it true that Wal-Mart Stores, Inc. (NYSE:WMT) is not as strong as before?

Wal-Mart would be among the top 30 countries in the world if we compare its $460 billion revenue to the GDP of any of the most developed nations. Further, Wal-Mart Stores, Inc. (NYSE:WMT) employs more than two million people across 25 countries around the globe. Do you think any company that huge can grow exponentially forever?

The size of Wal-Mart Stores, Inc. (NYSE:WMT) does not mean that it has become stagnant, or that there is no room for further growth. It only means that investors need to be realistic and understand it cannot grow at the same rate it did a decade or two back.

Let’s analyze the growth potential

Wal-Mart has understood the importance of urban centers as a growth opportunity and is moving toward small-format stores, called as “express stores.” Compared to standard supercenters, these stores are about 10% smaller in size, thus should provide better return on capital as express stores are projected to occupy 8% less space and cost 16% less. Express stores offer about 15,000 daily use items including groceries and are expected to be vital in drawing customers with busy schedules.

Wal-Mart Stores, Inc. (NYSE:WMT) has shifted its focus toward e-commerce as it’s a very important and growing format of business now that customers prefer that convenience in shopping. Wal-Mart has acquired Grabble for its mobile technology and Kosmix for digital advertising to strengthen its position in the online retail business. Further, its investment in Yiahodian, a Chinese online store, just clears its intention to move strongly in the e-commerce industry and Target Corporation (NYSE:TGT) big potential markets.

At present, about 60% of the U.S. population shop for their basic needs at Wal-Mart Stores, Inc. (NYSE:WMT), and the company realizes that does not leave for much opportunity domestically, thus it is looking for international expansion. The company continued to grow in Canada and is opening 40 new supercenter sites and converting discount stores into supercenters. It is looking forward to grow in Brazil, China, and South Africa with its “Everyday Low Prices” concepts in the emerging economies. Wal-Mart’s acquisition of MASSMART HLDGS ADR (OTCMKTS:MMRTY) in Africa should help it get a strong footing for the long-term.

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