There are some stores that are now opening during Thanksgiving. Wal-mart is one of these stores. Costco, one of the KDK Fund's planned purchases for 2014, is not. The focus of this article is going to be on why these actions are happening including revenue generation needs by the companies, wage needs by the employees, and profit needs by investors. It is also important to note that in reality, finding a deal and shopping is far more appealing that spending time with family and friends for a large segment of the American population.
The need for more revenue in this economic environment is taking on a new paranoia for some companies. Wal-mart is one of these companies. The recent quarter showed a slowing of growth and the guidance was not good. Needing to be open on Thanksgiving is essential for the company to increase revenue. In comparison, Costco's revenues have been steady. Even as they know they might be missing out on some sales revenue, it won't affect their guidance for the quarter. This level of leadership shown is important in running the company. Employees, customers, and investors know that they are getting a satisfactory level of performance without having to open on Thanksgiving.
Employee wage needs are high in places like Wal-mart. Because the average associate wage is low, working on Thanksgiving affords the employee to pick up some extra hours and some extra wages. With the holiday season upon them, the employees of Wal-mart know all to well the stress of needing to get extra hours to pay for extras like gifts. This need for more wages is something that Wal-mart is banking on when staffing stores open on Thanksgiving. Most employees literally cannot say no to working on Thanksgiving. Conversely, because Costco's associate wage level is higher, the need for stores to be open so employees can make more money is lessened. This way, Costco can continue to execute their business plan as well as take time off during the Thanksgiving holiday.
Investors (you and I) are hungry for more profits. Because of this demand that we put on businesses, some have decided to be open on Thanksgiving. Wal-mart's decision to be open on Thanksgiving has been given an endorsement by investors as there has been no negative reaction within the markets. Staying open on Thanksgiving will help meet investor demands for meeting profit expectations. There are pension funds, 401K funds, other retirement funds, and other investment capital that are depending on Wal-mart to be open on Thanksgiving in order to make profit numbers. On the flip side, because Costco's business plan is clear as to profit expectations, investors are regularly satisfied with the numbers both on the revenue side and profit side. It is interesting to see how the same stakeholders do not demand the same action from Costco as they do from Wal-mart.
When Thanksgiving comes, understand that stores that are open and stores that are not open are simply projecting their business ethos. It is a peek into what drives the decision making process at these particular companies. The combination of need for more revenue, wages, and profits drives companies like Walmart to be open on Thanksgiving. It is their business model and ethos and can be considered accepted and approved by all the stakeholders (management, employees, and investors) in the company. For now, Costco's business model and ethos allows it to stay closed on Thanksgiving. The company should still make their numbers, the employees still get the day off with enough wage earnings to enjoy the day, and investors can still feel confident that profits will be solid. That ability to execute on all three levels is admirable. Managers, employees, and investors who value the meaning behind Thanksgiving should be thankful for companies like Costco and question exactly what is going on at companies like Walmart that being open on Thanksgiving is more of a necessity for management, employees, and investors than anything else.
** KDK Fund does not have any current relationship with any of the companies mentioned in this article. It does plan to purchase shares of Costco in 2014. **
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