"Wal-Mart Stores (NYSE: WMT) just recently announced better than expected third quarter sales and earnings," observes Charles Payne. While cautious on the retail sector, the editor of WStreet Strategies is bullish on the world's largest retailer.
"In the past neither rain, sleet, nor snow could stop shoppers, but it is now proven there is one thing they aren't impervious to...massive job losses. People have run dry, owe more money and debts than they can service, and seem to be stuck waiting for relief.
"The strong results for Wal-Mart's third quarter are a sign of the times, where cash strapped consumers are being very selective in their purchases.
"Although the headlines are playing up the company's modest earnings warning for the fourth quarter, which was due to the strengthening of the U.S. dollar, we believe the underlying business remains fundamentally strong.
"Comparable store sales (comps) increased both at Wal-Mart U.S. and Sam's Club from higher customer traffic and average ticket.
"At Wal-Mart U.S., operating margin expanded 8 basis points year over year, and it would have been higher had it not been for one-time hurricane related store cleanup expenses. Comps advanced 2.7%, and will be above the pace of all competitors when earnings begin to trickle in next week.
"On the topic of the holidays, in our view management was the most optimistic as we have ever heard them. And, why shouldn't they be, the company has real operating momentum due to its price leadership message, cleaner store environment, and stronger merchandise offerings.
" We wouldn't be surprised if the fundamentals of the U.S. business help to counteract the currency headwind during the fourth quarter.
"We have been underweight specialty apparel sector equities for all of 2008. However, we are a bit more optimistic on hardline goods retailers, such as Wal-Mart.
"This is providing consumers with strong product value amidst their daily budget and job troubles. We currently have an overweight recommendation on Wal-Mart."
Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
Closing Bell: Economic Catapult for Thanksgiving & Black Friday (WMT, TGT, GRMN, GOOG, MSFT)
Deere up on Q4 earnings performance
Reid Hoffman: LinkedIn will go public (at some point)
