Wal-Mart Stores (NYSE: WMT ) has been taking a beating lately. Disappointing
Wal-Mart earnings showed higher costs sapped profits, and the retail giant
recently lowered its full-year forecast. Costco (NASDAQ: COST ) and others
continue to overshadow Wal-Mart in the discount marketplace . WMT stock has gone
pretty much nowhere in two years. But there are signs that things could be
turning around. The company has stopped its slide in U.S. same-store sales at
its namesake Walmart stores recently, and is embarking on an ambitious campaign
to tap into urban markets. Ground zero for this expansion is Washington, D.C.,
where the big-box retailer plans to open six Walmart stores. Wal-Mart has been
working on a scheme to open stores in the nation's capital for some time, but
this week the company announced it will be rolling out two more stores than
originally planned. The locations include neglected urban areas with few retail
options and persistent unemployment. City leaders partnered with Wal-Mart with
the idea that new stores would provide a much-needed shopping alternative for
residents and offer up new jobs. The retailer claims its stores will create a
total of 1,800 retail jobs and 600 construction jobs. Critics, of course, worry
the move will drive out mom-and-pop retailers and offer jobs that offer minimum
wage instead of a livable wage. Whether the move is right for the District and
its residents is one thing, but it's a no-brainer for Wal-Mart. Typically
relegated to small-town America and the suburbs, WMT has struggled to connect
with urban shoppers that represent a huge area of opportunity. Rivals like
Dollar General (NYSE: DG ) and Dollar Tree (NASDAQ: DLTR ) have been eating
Wal-Mart's lunch with smaller locations in strip malls. Dollar Tree including
the companys latest earnings, reported Thursday has seen 13 straight quarters
of year-over-year profit growth, and Dollar General has seen 10 in a row. The
fact that Wal-Mart, the world's largest retailer, has struggled amid an
economic downturn is very counterintuitive. One would think that persistently
high unemployment would appear to work in the favor of discounters like
Wal-Mart. But clearly just offering low prices is only part of the equation.
Wal-Mart hopes it can see big gains by pushing into a D.C. area with less
competition and no current WMT presence. You can be sure that if this model
shows material success, the big-box giant will be eyeing other urban areas very
soon. Jeff Reeves is the editor of InvestorPlace.com. Write him at
editor@investorplace.com , follow him on Twitter via @JeffReevesIP and become a
fan of InvestorPlace on Facebook . As of this writing, he did not own a position
in any of the aforementioned stocks.
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