Wal-Mart.... Breaking Out To Upside (WMT)

If you think of a retailer hitting a 52-week high during a slowing economy, it seems counterintuitive.  It seems a recession or a slowing consumer spending is good for some retailers.  Enter Wal-Mart Stores Inc. (NYSE: WMT).

If you are Lee Scott and Co. that cuts prices and goes for lower and lower pricing as your strategy, a weakening jobs picture, a tightening credit environment, a lower spending climate, and just outright uncertainty puts more and more folks over at the biggest retailer in the U.S.  Even when things were good they accounted for roughly 10% of all U.S. retail. 

The stock market may have seen more gains and financial stocks and retail stocks may have recovered, but Main Street is still getting worse.  The market is supposed to start discounting events for one to three quarters ahead depending on whom you speak to.  Joe Public can’t act as a discounting mechanism.  Most people spend what they have, and when they start running out of credit or start getting scared about their pocketbook they curb their habits.  Last time we checked, people still have to buy food, clothes, consumer staples, and other consumer goods whether times are good or when they are bad.

The current environment has saved Wal-Mart and much of the criticism about it.  The prior 52-week trading range was $42.09 to $51.57.  Shares are up to $53.34 late in the afternoon.  This actually looks like the highest point since earlier in 2005.  It’s really hard to congratulate the company, but that’s the stock market for you.  Foes one day, old pals the next.

Jon C. Ogg
March 20, 2008