Are You Long or Short on WalMart?

Monday, November 19, 2007 23:26
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I was asked a couple of months back by a CBS reporters to help introduce firms who were seeing fallout from the recent product safety scandals. they were interested in finding foreign firms whose products were really culled as part of the scandal rather than those who had safety problems themselves.. and in my mind there was only one firm that I could suggest

Wal Mart

Before I go on, this is not a WalMart bash post by any means… just a simple analysis of what I have seen and think may happen this Christmas season as a result of the product safety scandals.

When asked why I thought this, my answer was simple. the orders have already been booked, the goods have been shipped, and in many cases the payments from Walmart have been made to their suppliers…

In fact, if you look at the recalls, the majority of products being recalled are either on shelves or out in the market. Mattel was able to catch some before they it the market, but I cannot remember anyone else who did.

Since few consumers are buying direct from Hasbro, Mattel, etc it is in fact WalMart who is bearing the risk right now that consumers will not show. They own the inventory, and it is their responsibility to clear the shelves…. after all, WalMart cannot return the products just because they failed to sell them…. so, now they have to get people into their centers.

so, when I saw the CNN post Toy recalls, iffy economy bring bad tidings for toy sales I figured that even though WalMart had just reported strong earnings, WalMart and other retailers may now be in for a rough quarter of poor sales.. and that could mean that those long on the stock(s) could be in for a rough time as well.

Any thoughts on other stocks that may be exposed to poor sales form product recalls?

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