24/7 Wall St.

The world retail behemoth that goes by the name of Wal-Mart will report earnings pre-market on Tuesday, August 14.  We just saw the July same store sales Thursday, so much of the actual sales and interpreted earnings data should already be baked into the stock.  First Call estimates are $0.77 EPS and $92.75 Billion in revenues.  The coming quarter expectations are $0.68 EPS and $92.25 Billion, and fiscal January 2008 estimates are $3.16 EPS and $378.3 Billion revenues.

Target (NYSE:TGT) is still outperforming it with a nicer overall shopping experience and it is translating to higher same-store-sales.  Targets s-s-s were up 5.9% in July, while the blue behemoth posted a 1.9% s-s-s gain.  Wal-Mart has also forecast s-s-s growth of 1% to 2% for August, although its overly aggressive back to school discounting efforts are expected to weigh on margins.

The company has seemed to be doing well in electronics sales, so it will be interesting to see if that continues. The s-s-s breakdown came as +1.3% at Wal-Mart stores and then +5.1% at Sam’s Club (ex-fuel, or +4.9% with fuel sales).

Wal-Mart stock had started a recovery going into summer, but shares didn’t continue a run in the June to early July period when the market was on highs and shares are down almost 5% from the close this Wednesday.  In short, its chart is not that great and a multiple bottom is only around $45.50 or a bit higher.  Analysts still have a mid-$50’s price target, although the ratings are mixed. 

Wal-Mart’s stock is still stuck.  But the company got a bit of a safety net and you rarely hear any calls for the termination of Lee Scott any longer.  If he’s worried about a softening economy he may want to take a long ride into the sunset, because even if he can’t control the economy he will face more pressure if that stock doesn’t get back above $50.00 in the not too distant future.  We noted him as one of the 10 CEO’s that needed to leave their posts back in December, and 5 of the 10 have come to fruition.  He’s honestly doing more shareholder friendly activity after the last analyst and shareholder meeting and we even gave him credit for this.  The company has even started some of our 10 steps for them to repair the company.  The stock would still probably rise if the company decided to make a change in leaders, although there are currently no indications that this is even remotely close.  Even I, after calling for him to leave, won’t put a weaker and weaker economy on his shoulders as long as the company keeps making more shareholder friendly initiatives.  We’ll also get to see if the company is using its available funds to buy back stock.

Jon C. Ogg
August 10, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.