Wal-Mart Stores, Inc. (WMT) Profit: Weaker Than It Looks

Costco is a little pricey for my taste, despite its leading position in the warehouse segment. Its low-price advantage has helped it grow despite the sluggish U.S. economy, but that does not make it immune to economic weakness. Sales growth dropped off last month; if the trend continues, Costco could experience painful multiple contraction. Kohl’s has also experienced weak sales and poor execution recently, justifying its industry-trailing earnings multiple.

However, Macy’s and Target both seem to represent better investment opportunities than Wal-Mart right now; they offer better growth prospects at lower earnings multiples. Target’s comparable-store sales underperformed Wal-Mart’s last quarter, at 0.4%, but the company has a much bigger international growth opportunity. Target plans to enter the Canadian market in a big way this year, opening 125 stores beginning next month. Meanwhile, Macy’s generated a 3.9% gain in comparable-store sales last quarter, and 3.7% for the full year, driven by a greater-than-40% increase in online sales.

With Target offering superior international growth prospects, and Macy’s providing a better record of consistent comparable-store sales growth, these companies appear to be better investment candidates than Wal-Mart.

The article Wal-Mart Profit: Weaker Than It Looks originally appeared on Fool.com and is written by Adam Levine-Weinberg.

Fool contributor Adam Levine-Weinberg has no position in any stocks mentioned. The Motley Fool recommends Costco Wholesale. The Motley Fool owns shares of Costco Wholesale.

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