October 10, 2005

WM Stock Way Undervalued?

Bobby Gerry posts a Barron's article that gives pro-Wal-Mart stock analysts the center stage. (The original is subscriber-only). It contains two arguments that I do not believe: 1) high gas prices mean higher revenues, 2) these revenues come from customers of traditionally upper-scale merchants:

While analysts have voiced concerns that high gas prices will crimp consumer spending, that view may prove to be short-sighted. Wal-Mart's customer base could very well widen in tough times, with the stores maintaining their lower-income base and gaining some higher-income consumers who are looking to save some money. The first look at winter heating bills just might convince some Bloomingdale's shoppers that the time has come to step down to Wal-Mart.
I don't believe that Wal-Mart's own analysts think this will happen.
Posted by Kevin at 7:15 AM

August 25, 2005

$2.5B in in 30 Year Bonds

Anybody have any idea what Wal-Mart planned to do with the $2.5 Billion in cash it received in its 30 year bond sale?

The bonds were expected to yield 0.87-0.89 more than treasuries, and Wal-Mart's bond rating was expected to hold at "Aa2" by Moody's and "AA" by S&P. It actually did a smidgin better than that:

Trading in the supermarket’s existing paper on Tuesday saw spreads creep in on its 2015 notes by 1bp to about 57bp over Treasuries, according to MarketAxess. But spreads on its 2030 bonds were unchanged at 83bp over Treasuries. The deal is being led by Lehman Brothers, Credit Suisse First Boston and JPMorgan.

Posted by Kevin at 8:15 AM

August 17, 2005

Wal-Mart's Data

When surpassing expectations is not enough:

LITTLE ROCK, Ark. -- Wal-Mart Stores Inc. said yesterday that its second-quarter profit rose 5.8 percent, beating Wall Street expectations. But revenue fell short of forecasts as its customers continue to struggle with higher gasoline prices.

For the three months ended July 31, the Bentonville-based Wal-Mart earned $2.8 billion, or 67 cents per share, up from $2.65 billion, or 62 cents per share, in the same quarter a year before. The company reported sales of $76.8 billion for the quarter, up 10.2 percent.

Shares of the Dow industrial company fell $1.53, or 3.1 percent, to $47.57...

Still, the impact of higher energy prices is not linear, and those who have hedged against them, or have leaner operations, can gobble up more market share:
Wal-Mart's chief financial officer, Thomas M. Schoewe, said utility expenses rose $100 million and fuel costs were up $30 million in the quarter.

Still, the case can be made that Wal-Mart's dogged low-price model helps it run counter to economic cycles - making it a more compelling spending destination for consumers with tight budgets.

Also interesting, perhaps best seen in the light of people not making wild extrapolations from marginally useful data, is the end of the weekly sales reports:
Wal-Mart also announced yesterday that starting in February it will switch from its schedule of weekly sales updates to a quarterly report providing guidance on earnings and sales.

"The weekly updates were a little tedious and not terribly relevant," said Todd Slater, an analyst at Lazard. "They generally don't measure trends very well."

Good news for ALP is that The New York Times apparently believes that Wal-Mart's trademark is "every day low prices", not "always low prices":

The company aggressively squeezes suppliers and wields its overseas buying power to pass on its trademark "every day low prices" to consumers.

Posted by Kevin at 1:55 PM

June 7, 2005

WM Still a Buy

So says Bill Dreher of Deutsche Bank Securities... others are not giving the stock the thumbs down WM opponents are hoping for.

Posted by Kevin at 9:55 AM

May 16, 2005

IBD: WM Stock is Still Recommended

Investor's Business Daily notes with caution that many financial newsletters support the purchase of Wal-Mart stock, based on analysis of fundamentals.

Nevertheless, Wal-Mart still has strong supporters among investment letters.

Currently, nine letters recommend it.

That's a solid score -- making it tied for thirteenth place among stocks recommended by letters followed by the Hulbert Financial Digest. The most popular stock, Pfizer (PFE), is recommended by 17 letters.

And, yes, the most recommended stocks do tend to do better.

Wal-Mart's advisor score is actually higher now than at the start of 2004, when the stock was above $50 and seven letters recommended it.

Posted by Kevin at 2:52 PM

April 24, 2005


There's an article mentioning Wal-Mart in Barron's(scroll down). I'll post the whole thing in the extended entry since its subscription only.

BACK WHEN WINTER was in full chill, we wrote a brief item on Wal-Mart. The gist of it was that the company, as a wise pal of ours put it, was "a great story topping out." The stock was changing hands at slightly above 51; Our friend, who's a chart fancier (but a very decent sort nonetheless) suggested that if it broke much below 50-51, roughly its then 18-month trough, it was in for trouble. Just how far down would it go?, we remember asking. And he smiled and shrugged. (Did we neglect to say our friend could be frustratingly enigmatic?)

He did point out that the company's formidable size and corporate reach could easily make the action of its stock a barometer for the consumer, the economy and the market. And in many ways, the shares, which have spent a lot of time recently in the 40s, have indeed been a barometer, particularly for the market.

Wal-Mart, the biggest retailer on the face of the planet, naturally came to mind as we were mulling the prospects of a consumer slowdown and the air seeping out of the credit bubble. The company already has been feeling a bit of pain, as the uninspiring performance of its stock intimates. Its customers, management often stresses, live paycheck to paycheck, and paychecks have been somewhat paltry the past few years.

Moreover, its customers often are off in the boonies and driving is their only means of getting from where they are to where they have to go, so they're highly sensitive to soaring gas prices. And the company is prone to cite those prices in shrugging off disappointing performance.

Wal-Mart has been growing, to be sure, but not at the brisk pace its many fans on the Street had grown accustomed to. What's more, there's reason to suspect that its trademark double-digit sales gains may be a thing of the past. And not just because towering fuel prices might be with us for longer than we like to think.

On this score, Jon Jacobs, who's the fixed-income maven at Cantor Fitzgerald and a shrewd scanner of the investment scene generally, offers some intriguing observations on what's in store for Wal-Mart. Jacobs holds that beyond the impact of gas prices, the company is vulnerable on several fronts to the possible further detriment of its sales, earnings and stock valuation.

More specifically, he zeroes in on four factors, three of them fundamental. Let's start with the one that isn't -- what the company calls "headline risk." As noted, Wal-Mart has been quite adept at attracting negative publicity, which management is actively striving to counter via ads and a PR blitz. Jacobs wonders, though, if investors sense that "after decades of successfully toughing it out against both labor unions and communities trying to restrict 'big-box' expansion" the company may be in for rougher going.

As he dryly notes, whether Wal-Mart "can continue employing the nuclear option against unionization at the same time it tries to burnish its image as a good corporate citizen is an open question."

Turning to his fundamental concerns, Jacobs raises questions as to how vigorously Wal-Mart can continue to grow, even apart from the so-called headline risks. How much can the company expand and how much more market share can it wrest away from the competition when it already boasts nearly half of total U.S. chain-store sales? "No one," he reflects, "can grow twice as fast as GDP forever."

Jacobs also worries that the increasing shift of Wal-Mart's overall sales mix toward groceries, a "notoriously low-margin business," will chip away at the company's overall profit margins.

Finally, he cites reservations that the "international growth story is not as rosy as Wal-Mart's past numbers and pronouncements indicate." A sizable chunk of international sales gains the past two years he traces to the favorable currency-translation impact of a falling U.S. dollar (which, for the moment, has stopped falling). Last fiscal year, the company reported foreign business, which chips in some 20% of the whole, rose a rousing 18.3%. However, strip away the benign effect of a devaluing dollar and the rise shrinks to 11.6%, or not much different from the gain in total corporate sales.

All of which explains why Wal-Mart shares have been trending lower for quite a spell now and why earlier this month they sagged below $50 for the first time in two years and touched a new low last Friday. (The P/E, we calculate, is around 17). Since none of these drags is apt to vanish any time soon, Jacobs reasonably anticipates they'll continue to weigh on the stock.

Posted by Bob at 7:10 PM

March 4, 2005

Annual Dividend $0.60 per Share

Up 15% from last year.

The Board of Directors of Wal-Mart Stores Inc has approved an increase in the annual dividend to $0.60 per share, a 15.4% increase from the $0.52 per share paid during the previous fiscal year. For fiscal year ending January 31, 2006, the annual dividend of $0.60 per share will be paid in four quarterly installments of fifteen cents ($0.15) per share.

Based upon this announced increase, the Company plans to return more than $2.5 billion to its shareholders in the form of dividends this fiscal year. Wal-Mart has increased its dividend every year since its first declared dividend in March 1974.

Posted by Kevin at 9:56 AM

March 3, 2005

Feb Sales Better than Expected

Wal-Mart reports for February:

Wal-Mart said February same-store sales rose a better-than-expected 4.1% from a year ago, reflecting balanced strength at its flagship stores and Sam's Club.

The discount giant reported overall sales of $22.37 billion for the month, up 10.9% from a year ago. By segment, Wal-Mart Stores' overall sales rose 11.1% from a year ago to $15.13 billion, Sam's Club's overall sales rose 5.4% to $2.82 billion and international sales rose 14.4% to $4.41 billion.

The company had previously previewed a same-store sales increase of 4% for the month.

"For the March five-week period, we forecast comparative sales for the U.S. to be similar to or better than February," Wal-Mart said.

The stock added 48 cents to $52.52 in premarket trading

Posted by Bob at 2:00 PM

February 17, 2005

What Was That About the End of WM?

Remember last Thanksgiving's tremendous fuss and worry and glee when WM same-store sales increases were not as high as its own target. Well folks, the profits for Nov 2004 - Jan 2005 were higher than the year before:

Wal-Mart Stores Inc. the world's biggest retailer, posted an increase in fourth-quarter profit Thursday that was a little above analysts' expectations.

Wal-Mart (Research) reported earnings of $3.16 billion, or 75 cents per share, for the fourth quarter ended Jan. 31, up from $2.72 billion, or 63 cents per share, a year earlier.

Analysts surveyed by earnings tracker First Call forecast EPS of 74 cents

I told you it was much ado about nothing. Now, I'd be the first to point out that it would be easy to shift costs around to make this quarter look better (and others worse), but I won't just assume that's happened. Give me some evidence.

Posted by Kevin at 6:44 AM

February 15, 2005

Hyping WM as a Buy

Maya Kulycky says stock analysts are ambivalent about WM:

Now, with the company poised on Thursday to report a double-digit increase in sales and per-share earnings for fiscal 2005, some think Wal-Mart's stock is set to climb. So now is a good time to buy, they say...

But others aren't as enthusiastic and point out reasons why investors may not want to jump aboard the Wal-Mart bandwagon. The potential problems include the maturity of the store base in the United States, more involvement in the slower growth grocery industry and sales cannibalization as Wal-Mart opens stores near each other.

Posted by Kevin at 6:18 PM

January 12, 2005

Is Wal-Mart a Buy?

squawk_box.gifCNBC TV Squawk Box is running a poll on whether WM stock is a buy, sell, or hold:

Wal-Mart's stock has done little over the last year, rising less than 1%.

What's your take on Wal-Mart shares? Tell "Squawk Box" what you think. Register your vote on the left, and e-mail "Squawk Box" to explain your thoughts.

Thomas Schoewe, the company's chief financial officer, is Squawk's guest host Thursday

The current results are not too promising for WM...

Posted by Kevin at 8:34 PM

December 27, 2004

Media's Subdued Response to Good WM Sales

Do you remember the ruckus that ensued when Wal-Mart did not hit November sales targets, even though sales increased? This blog received much attention for insisting that the media, other bloggers, and anti-WM advocates were blowing this way out of proportion.

Wal-Mart was not on its deathbed then; it isn't now. People did not "wake up" on Thanksgiving and begin massive retail disobedience.

We noted that Wal-Mart was expecting a late rush of shopping, which is the official reason that they did not release sales data for the day after Thanksgiving. Sales did not increase as much as WM wanted, and a print advertising blitz ensued.

Well, that late rush came as expected--overall same-store sales for the five week period starting 11/27/04 are expected to be around 2% over last year:

Wal-Mart Stores Inc., which had faced tepid sales earlier in the season, said early Monday that December sales would come at the midpoint of its reduced December forecast. It added that sales on the Sunday after Christmas were above expectations.

It is important to emphasize that this "same-store" metric is not always representative of the whole, but will a solid representation most of the time. In total, WM opened up 286 new regular and supercenters stores through November 2004--about 24 a month, if none were opened in December--roughly 10% (286/2960) of the whole:

new stores.gif

Current Wal-Mart sales data is available here.

Posted by Kevin at 4:31 PM

November 30, 2004

Stephen Bainbridge Sums Up the Common Wisdom

Professor Bainbridge sums up the story that WM tried to pre-empt by not releasing Black Friday sales data:

In sum, my guess is that Wal-mart's woes are unique to it rather than, as in the past, suggesting a systemic problem with the economy. I'd also guess that online e-commerce has a ways to go before it can be invoked to explain any decline in retail sales.
All this inspired by one day's data not specified by WM!

Posted by Kevin at 10:44 AM

November 26, 2004

Black Friday at WM

We previously noted that WM will not be releasing today's Black Friday sales data, in a pre-emptive strike against the deluge of doom and gloom stories that will arise should today's sales figures come in below expectations. However, anecdotal evidence suggests that sales will be brisk:

WOODBRIDGE, Va. Nearly one-thousand customers rushed the doors of the Wal-Mart in Woodbridge when they opened at six a-m to take advantage of some specials sales.

Store manger Chris Harris says a main focus for him was rearranging the store to keep traffic moving -- that meant pulling some products from the floor and having customers pick up big items like T-Vs in the parking lot. The strategy comes after the fire marshall closed the doors to new customers for more than an hour on Black Friday last year.

UPDATE:Instapundit notes that anecdotal evidence can be incorrect:

BENTONVILLE, Ark. Nov 27, 2004 � Weaker-than-expected holiday shopping forced Wal-Mart Stores Inc. on Saturday to cut its projected sales increase for November by more than half, an ominous announcement for retailers as their busiest time of year begins.

The world's largest retailer estimated that the month's sales at U.S. stores open at least a year would be 0.7 percent higher than last November, well below the 2-to-4 percent range that the company had said it expected last week.

The new projection was based on four weeks' worth of sales, from Oct. 30 through Friday, the company said in a statement on its Web site.

Remember though exactly what WM stated two weeks ago:

"People use sales from that one day too much as a barometer of what the whole season is going to be like," said a spokeswoman from Wal-Mart's Bentonville, Arkansas head office.

"We are looking at the whole season and we are cautiously optimistic about that. What we see is that people are shopping closer and closer to the holiday so we don't know that this is a fair barometer."

This move to not release specific data seems to have failed, as people are now pre-judging the Christmas season by WM sales in all of November. The consensus seems to be "a solid--not spectacular--Christmas".

UPDATE 2: OK, people are piling on WM for it's too high forecast of same-store sales increases. Here's one that calls it "ominous for other retailers".

Give it up folks, WM most likely still sold at least $1.5 billion on Black Friday. And the data released do not include Saturday or Sunday. So everybody's judging WM on one single day's worth of sales, which are not broken out from the rest of the month! Since, as this Forbes articles suggests, WM did not have a discount blitz, like $25 DVD players, why is the result shocking? Still, why would a WM strategy of "protecting profits" actually lower profits, like many believe? I'd suggest that WMs profit margins might very well be higher than last year.

But I'm not putting up my money, as other people are. As of 10:45am Monday, 11/29, WM shares are down 3.3% from opening.


Posted by Kevin at 11:37 AM

November 15, 2004

WM Refuses to Release "Black Friday" Sales Data

In a move sure to upset somebody, WM will not be releasing sales figures for the day after Thanksgiving:

The day is one of the biggest shopping days of the year and traditionally kicks off the holiday shopping season.

Last year, the company hit a record high of $1.52 billion in sales on Nov. 28, the day after Thanksgiving. In 2002, the company posted $1.43 billion in sales on Black Friday.

Reuters cited a spokeswoman from Wal-Mart who said the industry uses sales from that day to measure what the rest of the holiday selling season will be like, and the company doesn't know that the measure is a fair one because consumers are shopping closer to the holiday.

Some points:

1) All releases of data by every company are a form of advertising
2) Public companies are not forced to release sales data
3) WM doesn't want you to make a decision about the holiday season based on one day...
4) $1.5 billion in a day -- damn!

Posted by Kevin at 2:24 PM