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Investing

Analyzing Wal-Mart (WMT)

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By Douglas A. McIntyre Published
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By Yaser Anwar, CSC of Equity Investment Ideas

  • Recently The Street has lowered 4th Q EPS estimates to $0.89 from $0.90 due to lower top line assumptions following management’s soft December sales outlook. WMT posted a likely lackluster holiday season and store remodels to once again negatively impact sales.
  • The Street has recently raised the SG&A rate change estimate to +31bp from +13bp to reflect reduced leverage on a lower sales base.
  • WMT hopes to drive comparable store sales through continued expansion of its supercenter format and by focusing on local market share positions. Operating over 684 million square feet globally. WMT aims to grow square footage at least 8% per year through the addition of over 60 million square feet in 07.
  • The SSS estimate fell to 1.1% from prior 1.7% and November SSS fell as expected. WMT Division declined 0.5% and Sam’s increased 2.0%. Total SSS were negatively affected by 80bps from strong hurricane related sales a year ago. By category, home and apparel were weak while food, electronics, and pharmacy were stronger.
  • December SSS guidance of 0-1% was below expectations given easing comparisons and management’s 4th Q SSS guidance of 1-2%. Assuming WMT hits the upper end of its December guidance, January would have to increase about 2.5% to get 4th Q to the low-end of the quarterly guidance range.
  • WMT continues to struggle on the top line as weakness in fashion apparel and home offset better performance in food, electronics, and pharmacy. 3rd Q results demonstrated WMT’s ability to deliver margin, but nevertheless have led to trimming of 4th Q EPS estimate to reflect the weaker-than-expected December top-line outlook.
  • Investors should expect near term sales to be pressured by weaker apparel sales and difficult comps related to last year’s hurricanes. Look for sales trends to improve in the spring when new merchandise is offered and hurricane comparisons ease.

    • http://www.equityinvestmentideas.blogspot.com/

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    About the Author Douglas A. McIntyre →

    Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

    McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

    His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

    A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

    TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

    McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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