Lairig Marketing

Our 180 On Walmart Is Complete – Adding WMT To LMI

Yes, we've pounded on Walmart for a long time. However, we made several posts in the latter half of 2011 noting positive changes in Walmart’s marketing strategy and management team. It’s time to put our money where our blog is.

Virtual money, at least.

The Lairig Marketing Index, resurrected in mid-February, is a faux portfolio of companies we believe have advantageous marketing strategies. The LMI contains Buffalo Wild Wings, Monro Muffler, LivePerson, and Harley-Davidson. In a little over a month, the index is up 4%, ahead of the S&P 500’s 3.3% [pretty good, considering MNRO is down 10%, due to a slow Q3].

Why add Walmart?

Walmart seems to have found a new groove. It has found new management, too, as we’ve reported twice – more digital experts and more forward-looking merchandisers. Inventory has been reset. Same-store sales are finally on a positive trend. Plus two “future” considerations.

Stream ’Em If You Got ‘Em
Walmart has joined a partnership of film studios in launching a “cloud” service for movies, with the horrible name of UltraViolet. Customers can have all the DVDs and Blu-Rays they’ve purchased, as well as new movie purchases, put in the cloud. They can then easily stream the content to their laptops, smartphones, and tablets. (They can also stream to their TV, but what would be the point?).

[Technically it is not a cloud, since a user’s content isn’t stored as such – instead, each user is authenticated to get streaming access to what they “own.”]

The rub? It will cost an extra couple of bucks per movie. The idea being you pay one time, rather than monthly, as per Netflix.

Walmart will launch this service mid-April. UltraViolet is a big, big test. Can it get consumers to (a) understand the offering, and (b) sense that it is a good value?

It’s The Economy, Stupid
UltraViolet aside, Walmart got the bugs out of its operations just in time for the once-again-slumping economy. We said at the beginning of October that the U.S. would revisit recession territory, and we’ll discuss it more next week. Coincidence or not, WMT’s stock price started a climb of 20% from October through late February.

So, into the LMI goes WMT, $1000 worth at this morning’s opening price.

And, into Walmart goes 50% of the 99%, for the next six months at least. Walmart will welcome them with open arms.

Rebuilding The Lairig Marketing Index With A Wild Choice

Time to resurrect our faux stock index of companies with excellent marketing strategies and/or strong competitive advantages. We did OK with the initial Lairig Marketing Index, with three strong choices out of four – LivePerson, Harley-Davidson, and especially Monro Muffler.

We drowned in our fourth pick, Coldwater Creek (which continues to run dry, with a 9% same-store sales decline over the 2011 holiday period). An even performance overall, before we “sold off” the entire index.

Let’s start the resurrection by grandfathering back in LPSN, MNRO and HOG. At great risk, mind you, given the upward 45-degree trajectory all three have realized recently. Buy high, sell higher, hopefully.

Now, let’s add the country’s best kept bars-and-restaurant secret: BWLD. Forgive our calling it a secret, but there are no Buffalo Wild Wings in Manhattan. Just two locations, actually, across the five boroughs of New York City (JFK? Oh dear…).

Yet there are over 800 Buffalo Wild Wings elsewhere, with heavy penetration in Texas and the Midwest “Heartland” states. Each location appears to have roughly 800 TVs, giving new meaning to being “in the zone.”

Who else has been able to take this long, long, long wings “fad” (circa 1980) to such a beautiful extreme? Double-digit growth in just about every metric. Including stock price gain. Last week BWLD jumped 15 points, from $64 to $79. Still higher today, at $84-and-change. We’ll hop on it anyway. The Buffalo Wild Wings marketing strategy looks too good to pass up.

Start with its unbelievably interactive home page. Words can’t do it justice. See for yourself here. You’ll be there for hours.

Our dummy Facebook account provides access to BWLD’s Facebook brand page, which shows a trillion likes, excellent company posts, and a million comments and shares. This is a case study for Facebook engagement.

The company spends roughly 3% of net revenues on advertising. It has held that percentage steady over the past three years of torrid growth – no resting on its laurels.

And this – if BWLD can accomplish what it did during these years of economic craptasticness, just think what it can do when (if) we recover.

Two risks to consider. The biggest is the split in company-owned and franchised operation. At some point, franchisors always reach an inflection point where they need to rethink the balance between the two ownership types. As a corollary, there is always the potential for franchisee revolt as the business gets bigger and more complex.

The second risk is minor, and apparently under the radar: What will happen when fans of Buffalo Wild Wings discover that the company DOES NOT HAVE A SINGLE LOCATION IN BUFFALO !?!?!?!

Sorry Tonawanda and Hamburg (?!?!). I knew Buffalo, and you sirs, are no Buffalo.