"Wal-Mart (NYSE: WMT) delivers amid the recent retail meltdown," says Richard Moroney, editior of Dow Theory Forecast, a blue chip service that has been published for over 50 years.
The advisor adds, "The company stands to benefit as cost-conscious shoppers shift away from convenience in favor of value." Here is his review of the stock, which earns his "long-term buy" rating.
"As evidence of strain on the U.S. consumer mounts, Wal-Mart Stores continues to post solid results.The nation's biggest retailer delivered U.S. same-store-sales growth of 2.4% excluding gasoline sales in December, while rival Target (NYSE: TGT) saw same-store sales fall 5% and other discounters and department stores also delivered bad news.
"With decent operating momentum and solid long-term growth prospects, Wal-Mart shares seem reasonably valued at 14 times the consensus profit estimate for the year ending January 2009. Meanwhile, the company is getting bigger and better.
"Wal-Mart operates more than 6,500 stores, including about 1,075 discount stores, 2,256 supercenters, 579 Sam's Clubs, and 112 Neighborhood Markets in the U.S. and roughly 2,800 stores across Latin America, Europe, Canada, and Asia. Wal-Mart's market leadership, low cost structure, and distribution capabilities represent sustainable competitive advantages.
"In the U.S., Wal-Mart has cut back on store openings, instead focusing on improving profi tability and reducing cannibalization of sales. Overseas, growth remains a top priority. China operations are posting robust sales gains, while the company believes a new joint venture in India has great potential.
"Wal-Mart plans to increase international selling space to nearly 30 million square feet by January 2010, up from 17 million square feet in January 2007.
"The retailer broadened its branded electronics lineup this summer by partnering with computer giant Dell
(NASDAQ: DELL). Wal-Mart also began its holiday price rollbacks well ahead of other retailers, cutting prices
on toys in October and on popular electronic devices beginning in November.
"In addition, the company instituted inventory reductions and improved merchandise presentation in an effort to bolster sales of apparel and home furnishings.
"Recent results suggest Wal-Mart's actions may be producing the desired results. Not only has Wal-Mart delivered
stronger sales than most rivals over the last two months, but its stock has also outperformed. Wal-Mart's price leadership should prove an advantage in the year ahead if economic troubles keep pressure on consumers. The stock is rated a long-term buy."
Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.
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