Wal-Mart's Duke Outlines New Normal and Late Christmas (WMT)

Wal-Mart Stores Inc. (NYSE: WMT) presented today at the Goldman Sachs retail conference.  This was one of the new CEO Mike Duke’s first presentations since taking the top position at the world’s largest retailer.  Goldman Sachs was looking to see how customer spending and behavior is going now that the customer is shifting back toward a more rational behavior

Duke noted that Wal-Mart now has 200 million customers globally per week.  Duke has been making store visits, but also said he likes to visit customers in their homes to see what is on their minds and what their needs are.  In this he said that Wal-Mart.is not just the low-end customer, but all customers. There is a new sense of frugality. He noted that the value for items that last is replacing the throw-away society.  Customers are also buying less “in advance” and defer purchases until they are needed.  There is also a huge spending gap around paycheck dates.  Duke called this the new normal.

In the retail environment, it is no secret that the calendar Q4 (fiscal quarter November to January for retailers) is so important to all retailers.  Duke noted that in this year he expects a late Christmas because of customers waiting until closer to the need-date and because of the desire to find values.

Another note was how so many customers decided to cut vacations this year.  He sees a possible 25% spending drop either in not taking a trip or in spending less on a trip.  He also noted how customers are eating at restaurants less.  But this also offers an opportunity for Wal-Mart to get the customers back in the store for food more than in the past.

August saw traffic increases in its key store spread.  Wal-Mex still reports same store sales for Mexico, and he said that was a 6.3% comparable figure and traffic was up almost 6%.  Duke also noted how the company increased earnings over the last year in this environment.

Late in the afternoon, Wal-Mart stock is down 0.5% at $50.84, and the 52-week trading range is $46.25 to $63.85.   If you look at the longer-term chart, Wal-Mart’s 50-day moving average is $49.74 and the 200-day moving average is $50.10.

JON C. OGG
SEPTEMBER 10, 2009