Walmart (WMT) has changed the face of retailing, thanks to its laser-like focus on providing the most products at the lowest possible price. After working well for decades, that strategy has faltered in the U.S., Walmart's largest market, where sales have stagnated.
The Bentonville, Arkansas, retailer -- the world's largest, with more than 11,000 locations in 28 countries -- isn't in danger of closing its doors. But Wall Street sure is ratcheting up the pressure for Walmart to bolster its bottom line because it is underperforming its peers.
Walmart's same-store sales, a key retail metric of performance at locations opened at least a year, rose 1.5 percent in its most recent quarter. Though that was the fourth straight increase and surpassed analysts' expectations, rivals such as Costco (COST) and Target (TGT) are doing better. The warehouse chain saw a same-store sales gain of 2 percent in its most recent quarter, while Target reaped a 2.4 percent increase.
Investors were fuming Wednesday after the chain forecast that profits would slump as much as 12 percent during the next fiscal year. Walmart blamed rising workers' wages and increased costs to revamp its digital and bricks-and-mortar businesses, among other things. Higher pay alone will add $1.1 billion in costs in 2015 and $1.2 billion in 2016.
Walmart also is slowing its pace of new store openings and announced plans to buy back as much as $20 billion worth of its stock, the price of which has plunged more than 31 percent since the start of the year. That's far worse than the Spider S&P Retail Exchange Traded Fund (XRT), which fell 6.4 percent during that same time period.
After tumbling 10 percent on Wednesday, Walmart's stock continued its decline Thursday, shedding 1.2 percent to close at $59.33. Some analysts argue that the sell-off is overdone and that the company is taking necessary steps to improve its financial performance.
"Walmart continues to work hard to better position itself to remain relevant in the retail landscape long term, both in its stores and online," wrote Nomura analyst Robert Drbul in a note to clients. "The competition remains extremely fierce and is not standing still. We view the steps it is taking as necessary but recognize that they are extremely costly." Drbul rates Walmart stock as a "buy."
Here are four areas that present particular problems for Walmart:
Culture: Meredith Adler, an analyst with Barclay's, told CBS MoneyWatch the retailer will need to move "beyond price." Adler said the chain has underinvested in its stores for years and has paid little attention to customer service. Indeed, Walmart has ranked dead last in the closely watched American Customer Satisfaction Index for more than a decade.
"In the retail business, it all happens at the stores," said Adler, who rates the stock as "equal weight." "You really have to change the hearts and minds of the people at the store, and that's a very big job when you are a company this big."
It's not like Walmart isn't trying. Earlier this year, it challenged its 4,597 U.S. stores to improve their "Clean, Fast Friendly" scores. In February, only 19 percent met these internal standards. Now, 67 percent do.
"We've still got lots of room to improve," said Gregory Foran, the head of Walmart's U.S. operations, during yesterday's investors' day. "And we've already put another line in the sand, and we've raised the bar higher for where we now expect them to get to."
E-commerce: Walmart is the third-largest U.S. e-commerce company behind Amazon (AMZN) and Apple (AAPL), posting $12.14 billion in sales in 2014, according to InternetRetailer.com. Walmart has invested $2.7 billion in digital improvements over the past three years and will spend another $2 billion over the next three years.
Investors, though , are concerned that the online sales may cannibalize business from its traditional stores.
Groceries: Although Walmart is the largest seller of food, it has been outflanked in that market in recent years by traditional chains such as Kroger (KR). This is a change in fortune for Walmart, which was expected to dominate food retailing, according to Barclay's Adler.
"They were scared 15 years ago that Walmart would put them out of business, and they said OK, we cannot stay the same," she said.
Walmart is hoping to capture more of the grocery business by expanding its smaller-format Neighborhood Market stores and improve its product offerings by broadening its private-label business.
Size: Retail consultant Howard Davidowitz has argued that Walmart is too big to be managed effectively and should split itself into as many as four companies. Walmart, which didn't respond to a request for comment, told investors it would take a "hard look" at its assets. That might include some international businesses and its Sam's Club warehouse stores.
But that might not be so easy. "The reality is that Walmart US is a big company," said Adler. "There isn't really anything you can do to split that up."