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Wal-Mart (WMT), which competes with chains such as Sears Holdings(SHLD), Costco (COST), and Target (TGT), reported results for the third quarter this morning. According to our Before the Bell piece, the famous -- and oftentimes controversial -- retailer beat expectations by a few pennies, earnings 84 cents per share from continuing operations. This was 9% better than the per-share profit earned in the comparable period.
Net sales went up only 1%. They were inhibited by the currency environment. But total sales aren't as relevant as same-store sales when it comes to this sector. If I were a shareholder of Wal-Mart, I would be very disappointed by the comps number, since it is the older locations which indicate how well a retailer is truly doing.
Management posted a domestic same-store sales statistic, excluding the effect of fuel, of -0.4% for the quarter. Last year, the company increased comps by 2.4%. The expectations for the metric going forward isn't great, either. Wal-Mart is calling for comps to be either flat or down during Q4.
That's not encouraging. I guess the holiday season is indeed going to be a challenging one. And we were hearing some pundits suggest that it wasn't going to be all that bad. Information does evolve, doesn't it?
Of course, maybe execs are being conservative and the business will do better than internal projections. I'm not so sure, though, after seeing the Q3 comps figure.
Wal-Mart continues to bring in the cash flow, so it has a lot of flexibility in terms of initiating marketing plans and promotions. And as far as the dividend goes, shareholders are all set.
Management will have to balance low prices with growth. In theory, consumers should be flocking to Wal-Mart because of the brand's reputation as a haven for those seeking values. But if things get too competitive, especially in the latter part of the selling season, the company may find it particularly difficult to keep those comps up.
I find Wal-Mart to be a better long-term idea right now. Short-term, I think there is risk to owning the stock. Shares are up less than 1% in afternoon trading. Not much conviction in that bid. The market is probably worried about sales, too.
Disclosure: I don't own any company mentioned; positions can change without notice.
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Reader Comments (Page 1 of 1)
11-13-2009 @ 3:09PM
roudy11z said...
Short term, long term WMT-I don't care I am always a buyer since I have full confidence in them staying ahead of the competition. I think history will bare me out on this.Of course I realize you blog writers must try to keep it interesting but in reality it is a "no brainer" where Wal-Mart is concerned.Keep up the good work and keep it interesting. RoudMan