Wal-Mart (NYSE: WMT), whose competitors include Target (NYSE: TGT) and Costco (NASDAQ: COST), reported same-store sales for the month of March. According to the press release, things are going pretty well at the retailer, given current economic conditions. Domestic comps over the nine-week frame rose 3.1% on an overall basis. Breaking that down to performance stats for Wal-Mart and Sam's Club on an individual basis, we see that the former increased its comps by 2.6% and that the latter improved its same-store sales by 6.1%. Over the five-week frame, comps weren't as good. They came in at 1.4%. Wal-Mart itself barely saw a move in the metric, rising 0.6%. Fear not, shareholders, for you have to consider the timing of the Easter holiday. It came early last year.
Now, international net sales didn't fare so well because of currency translations. If you decide to include that effect, then sales dipped well over 14% last month. Excluding currencies gives you a much more positive 7.8% increase. Can't really do much about currency issues right now. As we all know, all companies with international exposure have to face them. Nevertheless, I like Wal-Mart's comps. And I particularly like the performance at Sam's Club. A lot of consumers seem to be using the warehouse club to save money during the tough times. Wal-Mart's management is apparently reaching that shopper.
If you compare the current numbers to the comps reported in the year-ago period, you'll see that Wal-Mart continues to do well with marketing efforts that attempt to position the chain as a value player in the retail space. Unfortunately, as I write this, shares of Wal-Mart are selling off. They're down over 4% on active volume. Wall Street was expecting more from the retailer, you see, as this article makes clear. The call for the March comps on an overall basis was 3.2%. Admittedly, that's a big difference from the reported figure. I guess Wal-Mart is going to have to try harder.
This is a great reminder that you have to be careful if you decide to trade Wal-Mart. Even though it is holding up reasonably well during the recession, and even though it is doing positive things such as raising its dividend, you can encounter a sell-off at any point in time in this volatile trading environment, especially when market expectations are not met. Shareholders with longer-term horizons, however, can consider Wal-Mart a potential core holding. I wouldn't necessarily buy this one for a short-term trade.
Disclosure: I don't own any company mentioned; positions can change without notice.
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Reader Comments (Page 1 of 1)
4-11-2009 @ 9:28AM
roudy11z said...
Good article by Steven. I would just suggest that maybe any time is a good time to own Wal-Mart.Unless there is a drastic change overall I will stick with this program as I've done since 1981.RoudMan