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HenryTo
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HenryTo
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 Posted: Tue Feb 21, 2012 2:11 pm Post subject: |
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Morningstar on WMT's 4Q earnings. Stock down over 4% today.
| Quote: | | Wal-Mart WMT reported its fourth straight quarter of operating margin declines, which is consistent with our long-term thesis that the company will have to sacrifice profits to protect domestic market share. In the fourth quarter, expense leverage at all three business units was not enough to offset the 27 basis points of gross margin contraction. As a result, EBIT margin for the quarter fell to 6.8% from 6.9% in the year-ago period. The full-year operating margin compressed about 20 basis points to 5.9% from 6.1% last year. We expect the same going forward. EBIT margin results for the quarter and for the year were in line with our forecasts, and we are not making any material changes to our model. However, we plan to raise our fair value estimate by a few dollars to account for the time value of money and a lower tax rate. We believe the shares are currently fairly valued. For the second straight quarter, Wal-Mart reported positive comparable-store sales at domestic stores. In the fourth quarter, comps at U.S. stores came in at 1.5%, which was a 20-basis-point acceleration from the prior quarter, but off an easier comparison. Therefore, the two-year comp rate actually remained flat at negative 0.3%, so Wal-Mart did not make material market share gains this quarter against other leading competitors including dollar stores and warehouse clubs. However, the company did report that price investments resulted in positive customer traffic, which if sustained should begin to stem share losses. In our view, positive consumer traffic is crucial because comps driven by higher average tickets cannot be continue d until wage growth moves ahead of inflation. For the full year, the company reported comps of 0.2% at Wal-Mart U.S. stores and 5.1% at Sam's Club, which calculates to 0.9% on a consolidated basis. Sales at the international division increased 8.5%, excluding exchange rates and acquisitions. Excluding a $0.07 per share tax benefit, the company reported $1.43 in earnings per share, below the $1.45 consensus estimate. As a result of this and some profit-taking, we expect the stock to be down. We were surprised the company did not buy enough stock to meet mean consensus EPS. Management provided EPS guidance of $1.01-$1.06 for the next quarter and $4.72-$4.92 for the full year. These ranges are based on a roughly 33% tax rate, so we'll make that adjustment in our model. Consensus EPS expectations are already at the high end for both the first quarter and full year. Helped by share repurchases, we believe the high end of the fiscal 2013 range is doable and we model accordingly. A lthough down about 2% this year, the company still generated more than $10 billion in free cash flow. We expect similar free cash generation, which gives Wal-Mart the ability to lower share counts enough to meet the high end of its EPS ranges. |
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rffrydr
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| Posted: Mon Dec 12, 2011 7:50 am Post subject: |
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Bringing the "chill chain" to India will work wonders on world food inflation (45% of produce rots in the "most hungry" nation in the world. Back home will still set the direction for the stock:
http://www.peopleofwalmart.com/photos
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HenryTo
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| Posted: Tue Nov 15, 2011 12:40 pm Post subject: |
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Morningstar on WMT's 3Q earnings:
| Quote: | | As expected, Wal-Mart's WMT operating margins fell in the third quarter. Sales and operating margins were essentially in line with our forecast. Gross margins fell 48 basis points, but Wal-Mart was able to leverage expenses at all three business segments. However, the 31 basis points of expense leverage was not enough to offset the gross margin decline. As a result, EBIT margins contracted about 20 basis points to 5.3% from 5.5% in the year-ago period. The company believes it can continue to lower costs to offset its planned $2 billion price investments in the gross margin line, but we are not believers. This is now the third straight quarter of EBIT margin declines. We are reiterating our contrarian long-term thesis that Wal-Mart will have to sacrifice margins to defend its market share. Comparable-store sales growth came in at 1.3% at U.S. Wal-Mart stores, which was the first positive comp in more than two years domestically. This was not news, since management stated this at its analyst and investor day in October. However, we believe inflation in the 5%-7% range has been the main driver of the comp turnaround. Food sales account for about half of Wal-Mart's sales. Therefore, applying inflation over the past three months to a sales-weighted average, the company should then be comping in 3.5%-5% range, assuming all the rising input costs are passed to consumers. Moreover, traffic trends remain negative at domestic, and we do not think rising ticket is sustainable for the low-end consumer in an environment of low wage growth and employment. Additionally, competitors like Kroger KR and nearly all of the dollar stores are posting same-store sales growth in the positive mid-single-digit range, but off much tougher year-ago comparisons versus Wal-Mart's negative comps comparisons. The company continues to lose share to some of its more formidable competitors. The company delivered $0.97 of earnings per share, a penny below the consensus estimate. Share repurchases and a lower tax rate helped reported EPS. We had buybacks in our model, but had not built in a 30% tax rate for the quarter. We do not model a 30% tax rate going forward. Management kept intact its prior full-year $4.45-$4.51 EPS guidance, which is in line with the $4.50 consensus view. We are not making any material changes to our model and our $57 fair value estimate. Positive comps at domestic, along with some rotation from eurozone equities to large-cap U.S. defensive stocks, have pushed Wal-Mart's share about 10% higher over the past few weeks. We think the shares are fairly valued, at least until the company's comparable-store sales move at least in line with the some of the stronger players in retail. |
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rffrydr
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| Posted: Tue Nov 08, 2011 8:11 pm Post subject: |
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Wal-Mart Back on Track
By Gary Morrow | Nov 08, 2011 | 4:02 PM EST
| Quote: | Wal-Mart is back in bull mode today a powerful 2.25% gain on heavy trade. The ramp has pushed shares past a major resistance area that had held the 52-week highs in January and again last month.
The current rally started shortly after last Tuesday deep gap-lower open that dropped shares below key support near the May highs. WMT had faded following an Oct. 27 re-test of the $58.00 level but mounted a quick recovery with little of the expected pre-earnings base-building. After four straight gains, WMT was back up to the highs, leaving support near the May peak behind.
Today’s early action pushed shares past $58.00 with ease, and as bulls have taken notice, the stock has been moving steadily higher all day. With the previous multi-month highs fading in the distance, the level will become a major support zone with one week to go before the company reports its third-quarter results. I had anticipated more in the way of a sideways consolidation after last month’s re-test, but it's now obvious that three days of profit-taking were all that was needed. WMT is now up more than 4% from the Nov. 1 spike low and appears ready for a run back up to its major highs set back in 2008 at $63.85. |
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HenryTo
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| Posted: Thu Oct 13, 2011 11:03 am Post subject: |
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Retailing Today's latest comments on WMT:
| Quote: | Comp nightmare ending at Walmart October 12, 2011 | By Mike Troy
BENTONVILLE, Ark. — Two years of declining same-store sales at Walmart are poised to end next month when the retailer reports third quarter results that reflect positive momentum from a wide range of initiatives put in place during the past 12 months, judging from comments made by senior executives during an all day meeting with analysts on Wednesday.
Executives stopped short of updating the company’s guidance provided at the end of the second quarter, which called for comps to be flat to down 2%, but they could hardly contain their optimism in discussing the performance of the U.S. stores division where it was revealed that comps have been positive for the last month of the second quarter and the first two months of the third quarter.
“I’m very excited to talk about the progress we are making in our U.S. business because it is substantial,” Walmart U.S. president and CEO Bill Simon said during Walmart’s 18th annual analysts’ meeting. “We are very optimistic about our sales improvement.”
Simon said the momentum in the company’s business began building in May as the effects of adding back items to the product assortment, improvements in in-stock levels and increased in-store promotional activity helped the company regain lost customer traffic and increased transaction sizes.
Contributing to positive comps in August and September were back-to-school seasonal results that chief merchandising office Duncan Mac Naughton said the company was please with. Looking ahead to the holidays, he suggested Walmart is very well-positioned to maintain sales growth and he disclosed some aggressive marketing plan.
“We are very excited and very well prepared. Our marketing plan for the holidays is quite significant,” Mac Naughton said.
For example, he indicated the company’s television advertising will double its share of voice and suggested to those attending the meeting that if they don’t see a TV spot from Walmart this holiday season they aren’t watching TV. In addition, the company plans seven tab advertisements, 10 free-standing inserts, a toy catalog, a holiday entertaining guide and apparel guide that will be distributed in stores.
“We are really looking forward to the upcoming holiday season,” Mac Naughton said.
Looking ahead to next year, Simon indicated Walmart will continue to accelerate the momentum of existing stores while expanding with new stores. The key driver will continue to be supercenters of which the company has plans for about 130 to 135 new units in addition to between 80 and 100 small format stores, of which the majority with be Neighborhood Market stores with about 20 store being the small Walmart Express concept where results are said to be exceeding expectations.
Walmart plans to spend between $6 billion and $6.5 billion on U.S. expansion next year, out of a total company capital expenditure budget of between $13 billion and $14 billion. The international division receives the second largest chunk of those funds with between $4.5 billion and $5 billion forecast to be spent overseas. Sam’s Club will receive about $1 billion to fund the addition of 10 to 15 clubs and remodeling activity.
Walmart expects its expansion to add between 45 million to 49 million sq. ft. of new selling space which, coupled with domestic and international comp growth, will yield sales growth in the 5% to 7% range and equate to between $22 billion and $31 billion in additional sales.
“Our business is stronger today than it was a year ago and it will be stronger a year from now than it is today,” Wal-Mart Stores president and CEO Mike Duke said at the conclusion of the all day meeting. |
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rffrydr
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| Posted: Wed Jun 29, 2011 7:01 am Post subject: |
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Don't forget the debt-card reform. If we just remember the effort WMT put into becoming its own debt card issuer (bankette) we can get an idea of how important this is. Ave transaction costs around 12c vs 44c.....straight to the bottom line.
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HenryTo
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| Posted: Tue May 17, 2011 10:49 pm Post subject: |
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Morningstar on WMT's 1Q earnings. Eight consecutive quarters of same-store sales declines:
| Quote: | | First-quarter sales for Wal-Mart's WMT domestic stores continued to be weak, but were offset by strong international top-line results, better-than-expected results at the wholesale club business, and chainwide cost controls. The company delivered about 4% top-line growth, helped some by currency, and reported $0.98 in earnings per share, which was $0.02 ahead of consensus. Overall, first-quarter results as well as the updated full-year sales and earnings guidance are within our expectations, so our long-term assumptions and our $60 fair value estimate are intact. Currently trading at about 11 times on a forward price/earnings and roughly 6 times on an enterprise value/EBITDA basis, the shares are undervalued for a company poised to turn around same-store sales at domestic stores and with significant international growth opportunities still ahead, in our view. Comp sales at U.S. stores came in at negative 1.1%, as consumers at core U.S. stores remain under pressure from rising gas and food costs. This is now the eighth straight quarter of negative same-store sales declines at U.S. Wal-Mart stores. According to management, initiatives that include every day low prices, broader assortments, and remodeling are gaining traction in the food segment at stores. However, the transformation in the general merchandise categories will not be complete until the second half of the year. In our view, an excessive inflationary environment that we expect in the back half of the year provides Wal-Mart an opportunity to reconnect with U.S. consumers it lost from past pricing and merchandising missteps, in particul ar in the general merchandising categories where the company has lost meaningful market share to the dollar stores. Given the company's size and scale, positive comps and the subsequent expense leverage provide significant earnings power and cash flow generation that the market is underestimating, in our view. Moreover, smaller urban and rural store formats provide potential sales and share drivers in U.S. markets. The company plans to test 15-20 stores before any meaningful rollout is undertaken. Last, we continue to believe Wal-Mart could be one of the more significant international growth stories in retailing today, evidenced by 11.5% sales growth during the quarter. Given Wal-Mart's footholds in several rapidly developing economies, we expect this segment to deliver about 10% annual revenue growth on average. |
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rffrydr
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| Posted: Tue May 17, 2011 8:24 am Post subject: |
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Literally feeding off WalMart Supercenters that is Aldi's critereon for location.
http://aldi.us/index_ENU_HTML.htm
Electronics going to Amazon and dollar stores still drag from below.
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rffrydr
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rffrydr
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| Posted: Wed Feb 23, 2011 10:04 am Post subject: |
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Been keeping an eye on WalMart for the last few quarters as I think it just might be our "bank of the future"--"us" being the unwashed masses.
But as is, they are losing customers high and low. $4 gas for the summer is just going to exacerbate matters. They can't compete in India to china's scale (no money in selling a single cigarette) and, other than china, are sitting on some global eggs (Germany anyone). "Remodeling" gimme a break! Urban centers shows they know what they lack--but, then, that's not a WalMart. Worst of all they have now have twice failed institutional money in the last decade.
Though unlikely, it is entirely possible that WalMart shows degradation over the entire year. Their success in china is simple: WalMart is brand quality and consistency at the best value price. But isn't it a quality of the "middle class" that they can discriminate (and be discriminated by) on this level?
Maybe after a good china scare. My idea is that WalMart rallies last-- in company with the straggling banks.
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Last edited by rffrydr on Mon Dec 12, 2011 7:48 am; edited 1 time in total |
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HenryTo
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| Posted: Tue Feb 22, 2011 6:18 pm Post subject: |
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Looks like the UBS analyst hit the nail on the head. Following is Morningstar's take on WMT's 4Q earnings:
| Quote: | | Fourth-quarter sales for Wal-Mart WMT U.S. failed to live up to management's and our earlier expectations, but the company still delivered positive earnings growth through continued top-line momentum in international markets as well as cost controls and other chainwide efficiencies. Despite the soft U.S. sales, our long-term assumptions remain largely intact, and there is no change to our fair value estimate. We find Wal-Mart's current share price attractive at about 12 times our preliminary forward fiscal-year earnings per share forecast, an enterprise value/EBITDA of just over 6 times, and a free cash flow yield of 5.5%. Efforts to correct certain pricing and merchandising issues in the United States may take longer than we initially forecast, and competition from dollar store chains remains fierce, but we're confident that management's four-point plan to improve the performance of existing stores will eventually result in a reversal of negative U.S. same-store-sales trends (which have declined for seven consecutive quarters, including a 1.8% drop during the fourth quarter). Each aspect of management's plan--including everyday low price leadership, broader assortments, additional store-remodeling activity, and increased multichannel options--strikes us as achievable goals to reconnect with U.S. consumers, especially considering Wal-Mart's tremendous size and scale advantages. We'd also add smaller, urban store formats to the list of potential sales drivers over the medium term. Over a longer horizon, we believe inflationary sales growth rates in the U.S. are attainable, and we disagree with market assumptions suggesting that negative sales trends will continue into perpetuity. We continue to believe Wal-Mart could be one of the more significant international growth stories in retailing today, evidenced by 9% growth during the quarter and strong contributions from growth markets such as Brazil, China, and Mexico. We expect this segment to average almost 10% revenue growth annually, given Wal-Mart's footholds in several rapidly developing economies. At first glance, management's 2011 guidance--including square footage growth of 3%-4% and earnings per share of $4.35-$4.50 (representing 7%-11% growth year over year, excluding one-time items)--looks reasonable. We plan to adjust our model for modestly lower near-term sales expectations in the U.S., but also lower capital expenditures than we had anticipated ($13.5 billion-$14.5 billion versus earlier forecasts around $16 billion). These changes will effectively cancel each other out, leaving our fair value estimate intact. |
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rffrydr
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| Posted: Tue Feb 22, 2011 9:46 am Post subject: |
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Jimmy's on the positive spin--
Wal-Mart's Loss Is Everyone's Gain
By Jim Cramer
| Quote: | | Maybe so many of our nation's stores are reporting decent comparable sales has to do with Wal-Mart itself. When I see its comps down 1.1%, I think to myself not that Wal-Mart's shoppers are buying less, but that they are going elsewhere, that it is zero-sum. Perhaps they are going to Costco , which is doing spectacularly, or maybe Kohl's , which has relatively good numbers. They could be migrating to Macy's for clothes, or more likely Ross Stores , TJX , Limited and Bed Bath & Beyond , including Harmon, the cosmetic and drug discounter. They may be going to Walgreen , too. And certainly Home Depot and maybe Lowe's . If they are in to healthy food, they go to Whole Foods if they can afford it, or they go to Safeway which has a commitment to organics.... |
Some of this is no doubt true. That Whole Foods move is more than a year in the rearview mirror however. And Lowes?... I don't think so Jimmy. There's no escaping the quicksand of the Dollar Store.
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HenryTo
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| Posted: Mon Feb 14, 2011 5:21 am Post subject: |
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RetailingToday.com on WMT:
| Quote: | THE NEWS | MORE WEAK SALES AT WALMART
BENTONVILLE, Ark. – Walmart is scheduled to report fourth-quarter results on Feb. 22, and when it does UBS analyst Neil Currie believes same-store sales at the U.S. division are likely to be negative. He based that conclusion on a proprietary survey of the company’s parking lots that revealed stores weren’t very busy coupled with overall challenging economic conditions and bad weather that have impacted competitors.
“We now believe that Walmart is more likely to report negative rather than positive comp-sales growth in (the fourth quarter) and that sales traction from strategic repositioning may take more time than originally expected,” said Currie.
If Walmart reports a negative number it would be the seventh consecutive quarter in which it has done so, and senior executives will have some explaining to do following repeated assurances to the financial community during a prerecorded conference call that comps would turn positive in the fourth quarter.
Despite those verbal assurances, the company’s official guidance provided at the end of the third quarter envisioned the potential for negative comps as the range of estimates extended from a 1% decline to a 2% increase.
THE FIX What we really meant to say . . .
Technically speaking Walmart could report negative fourth-quarter same-store sales and be within its guidance range, but that’s not going to sit well with the financial community, and it would be an interesting tap dance. Analysts were led to believe the fourth-quarter comp would be positive, and if that’s not the case management’s credibility, ability to forecast business results and the effectiveness of its strategies will be called into question. Weather, the economy and high gas prices certainly impacted consumer spending in the fourth quarter, and Walmart can attribute weakness to those factors, but sales forecasts should have taken those variables into question, which is why questions about Walmart’s ability to execute and the effectiveness of strategic initiatives will linger until comps turn positive. |
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rffrydr
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| Posted: Thu Feb 10, 2011 11:09 am Post subject: |
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Was listening to an analyst last week who correctly anticipated WalMart's pain: 40% of its customers are Dollar-Store customers. Six years ago, Dollar Stores didn't even make the "league tables." Still like WalMart as the "new-bank" but have not pulled the trigger and clearly now must wait as, despite their success in china, WalMart has become a deep-cyclical. Irony of ironies.
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