Apparently, things are not all sweetness and light at WalMart - have a look at this report:

Shari Eberts, retail analyst with J.P. Morgan, said the company's second-quarter forecast "is the largest negative revision in recent memory," and shares of Wal-Mart fell nearly 4 percent in early trading.

Wal-Mart's sales have suffered in recent quarters as soaring gasoline prices cut into household budgets, and the world's No. 1 retailer said it expects energy prices to weigh on second-quarter results too.

I don't think it has as much to do with the cost of fuel as this analyst would have us believe. Why do I say that? Two reasons. First this, from the same story:

Wal-Mart's weak first-quarter performance comes in contrast to rival Target Corp. (NYSE:TGT), which reported better-than-expected earnings as it kept prices up and reaped profits from its credit card operations. In contrast to Wal-Mart's focus on low prices, Target has carved out a niche selling stylish goods at low prices, as well as catering to consumers drawn just by price.

I'll fill in the blanks for the analyst, who likely hasn't left her desk and visited an actual WalMart or Target recently (or possibly ever). Here in the Columbia area, we have two nearby Targets, and two nearby WalMarts. When I walk into Target, what do I see?

• A Clean store - no disorganization on the shelves, the floors are clear, things look organized
• A staff that's working - stocking, checking people out of the store, etc

In contrast, what do I see at WalMart when I step in there?

• A somewhat dirty, somewhat unkempt store. Disorganized shelves, floors that look dirty
• The staff is socializing with itself - hanging around in the aisles, working slowly if at all

Here's what I think happened. After Sam Walton died, and a new team took over, standards slipped. Some bright MBA type decided that they could cut costs by doing without as much training (the socializing staff), and without as much cleaning (the general sense of disarray I see in there now). I'd bet that the MBA type who dreamed those things up is happy as heck, seeing reduced costs on his spreadsheet. Meanwhile, he's got no idea that this has a direct bearing on weak sales.

These small signs of distress are what I saw at KMart the last few years, before all the local stores were closed. Local shoppers started staying away because of those things. Ironically, the local WalMart is in an old KMart location - and it seems that location isn't all they've picked up. What the analysts who think this is all about energy costs miss is the small day to day stuff, which is almost certainly driven by some misplaced "cost control" policies from on high. We've all seen those kinds of things in action, and we've all seen the kind of damage they can cause. Just look at KMart...