Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

What Do Wal-Mart Stores, Inc. (WMT)’s Results Say for Retail?

Page 1 of 2

February hasn’t been a good month for Wal-Mart Stores, Inc. (NYSE:WMT). First Bloomberg released internal emails pointing to weak February sales and now revenue comes in a little light for the quarter ending January 31. Even though revenue grew by 3.9% to $127.92 billion, it fell short of the consensus expectation of $128.77 billion. Perhaps even more disappointing was the retailer’s guidance for both the year and the coming quarter. The company’s guidance fell short of the $1.18 per share earnings target, and its full year estimated range was lower than anticipated, though it did include the $5.37 per share consensus estimate. Holiday sales were also soft, missing expectations, though the company did see some strength at the end of December and into January.

Wal-Mart Stores, Inc. (NYSE:WMT)The earnings report wasn’t all bad news; the company did report growth in international sales, spurred in part by austerity measures in the Euro-zone. The 6.9% growth in international sales helped counter the meager 1% same-store sales growth domestically. It is worth noting that though international sales were a bright spot for the quarter, they fell short of expectations for the year. The company also reported sizable growth in free cash flow, an uptick of more than 19%. The retail giant announced an 18% increase in the annual dividend, boosting it to $1.88 a share.

Often analysts look to Wal-Mart as a bellwether of US retail, so do the company’s relatively poor results and flat outlook give cause for worry? There doesn’t seem to be major evidence of a broad slow down yet, even if Wal-Mart typically accounts for nearly 10% of non-automotive retail spending in the US. It does point to more pressure on the lower-income portion of the population, some of which is due to the recent increase in payroll taxes. Retail sales for January were in line with expectations, so it seems the increase in taxes hasn’t had a huge impact on the broader market. Another issue that may show up is the stress from rising gas prices, which would further depress sales.

Another factor, posited by Wal-Mart itself, was the delay in tax returns, forcing potential customers to hold back on spending that typically occurs in February. This may not bode well for some of the lower-end discounters like Dollar General Corp. (NYSE:DG) and Dollar Tree, Inc. (NASDAQ:DLTR). All three discounters cater to a lower-income consumers and accordingly are more likely to see the effect of reduced discretionary income on their sales.

On the other end, analysts commonly see retail operations like Target Corporation (NYSE:TGT) and Costco Wholesale Corporation (NASDAQ:COST) as less susceptible to these particular issues due to their wealthier customer-base. The annual incomes of Target and Costco customers are $64,000 and $96,000 respectively. For comparison’s sake Wal-Mart pegs its average customer as earning roughly $40,000 annually. However, Wal-Mart’s forecast for its Sam’s Club segment, which targets a wealthier client base, was flat. Sam’s Club grew 5.6% last year during the same period, which indicates Wal-Mart is expecting a significant slowdown relative to the previous year. Target and Costco have yet to release their earnings; it remains to be seen whether they are anticipating similar slowdowns.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!