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Wal-Mart's Results: This Thing Could Be Turning

December 07, 2007 | About:
Todd Sullivan

Todd Sullivan

22 followers
Wal-Mart's Results: This Thing Could Be Turning

Wal-Mart (WMT) reported November sales today and it is continuing to gain momentum.

                     Net Sales
4 Weeks Ended Percent 43 Weeks Ended Percent
11/30/2007 12/1/2006 Change 11/30/2007 12/1/2006 Change

Wal-Mart Stores $20.165 $19.244 4.8% $192.347 $181.456 6.0%
Sam's Club 3.620 3.331 8.7% 36.160 33.797 7.0%
International 7.933 6.690 18.6% 73.024 62.356 17.1%
Total Company $31.718 $29.265 8.4% $301.531 $277.609 8.6%



Company same-store-sales rose 1.5%.

Wal-Mart Stores

Grocery and pharmacy continued to drive strong comparable store sales during the November four-week period. In addition, Wal-Mart had very solid "Black Friday" sales across the store, from entertainment items to sleepwear.

Sam's Club

In the November four-week period, Sam's Club had strengths in a number of holiday and gift-giving categories, including electronics and video games.

Guidance

The Company expects the comparable store sales of its U.S. operations for the December five-week reporting period to be between one and three percent. Can Wal-Mart just stop giving us guidance? One to three percent, we get it. Let's just save the time and we'll assume it. Just let us know if it will be anything different.

All in all, what is not to like? The international operation continue their growth up to 25% of sales from 24% last year in Q3 despite a soft Mexican environment. Even thought they were not buying as much, more shoppers were coming through the door throughout the country.

More good news:

Target (TGT) today said that November same-store sales rose 1.1 percent, missing analysts' expectations of a gain of 3 percent and shares fell 4%. The reason? They may actually a see an earnings decline in Q4 if earnings in the quarter are not "impressive".

Taget and Wal-Mart have become an "either / or" proposition. You are either going to one or the other. Now that Wal-Mart seems to be getting its act together in the US, Target will face more headwinds. Now, do not get sucked into the % gain for the two companies. 1.5% for the $200 billion Wal-Mart is considerably more dollars than the $46 billion Target. When that volume of dollars is flowing to Wal-Mart rather than Target, it means two things.

1- Wal-Mart means value and that is what shoppers want this year.
2- Wal-Mart's renovated stores and improved electronics and clothing departments (the one here looks great) are bringing in shoppers who last year went to Target.

Today's report is very good news for Wal-Mart shareholders. The supertanker that is Wal-Mart has been doing a slow turn since early summer and today shows us it might just be coming around. Let's not get too excited though. We need a
December confirmation to be sure. However, based on these numbers and the walmart.com results to date, one ought to be very encouraged.

____________________
Originally published at Todd Sullivan's - ValuePlays

About the author:

Todd Sullivan
GuruFocus - Stock Picks and Market Insight of Gurus

Rating: 4.0/5 (3 votes)

Comments

billytickets
Billytickets - 6 years ago
Nice article but the true value investor bought near the bottom http://www.gurufocus.com/news.php?id=12434
commodity
Commodity - 6 years ago
Remember when everybody hated MCD a few years ago

and BOB OLSTEIN was buying hand over fist.

Remember back in the 90,s when IBM looked like Wall ST road kill.

Sometimes contrarian investing works.

However,Dreman got killed on Fannie and Freddie.

Better buy more than just one stock.

You just never know.

Would love to buy the retail index at the low.

Will all the homebuilders go Ch 11?

IF not a great index to buy.

DaveinHackensack
DaveinHackensack - 6 years ago
"Remember when everybody hated MCD a few years ago"

MCD has been a dynamo overseas, and has done a great job of adapting to foreign markets: they sell vegetarian McTiki Aloo burgers in India; in Buenos Aires, McDonald's has espresso bar areas that look like a fancier Starbucks, etc. WMT needs to be successful internationally to get significant further growth, and its track record overseas has been spotty.
billytickets
Billytickets - 6 years ago
Fact is WMT is about 13% in 3 months since it was recommended and in the 43s was asteal Overseas growth or not.
DaveinHackensack
DaveinHackensack - 6 years ago
I'd take the gains and move on to a better opportunity.
buffetteer17
Buffetteer17 premium member - 6 years ago
I bought into WMT at $43.5 with 5% stake. I'm the originator of the "What's so great and wonderful about Walmart? thread" I don't really like Waltmart as an investment; I don't trust the future income and growth to hold up. But at $43.5, I really didn't have a choice. That's the trouble with being logical, it reduces your options.

Anyhow the question is what do to with the 13% short term gains? Let it ride to convert to long term gains? Sell it plus enough DCF to cancel the tax liability? (Bankrupt coompanies are great for tax loss sales, but not much else) Several gurus like WMT which is a plus. Walmart is hated by the media (I mean unions), which is a plus. My IV estimate is around $60-$70 so it is still undervalued but not by a large margin. The trouble is I am not very confident about this IV estimate. Could be a lot less or a lot more. The twin problems in estimating IV: (1) hard to tell how much of the cash flow is owner earnings, since they've been investing in growth and (2) hard to tell what the future growth prospects are.

I think I'll cash out at about $50. I now have 16 stocks which is a little more than I can handle. I'm 30% on margin, and I want to reduce this before I retire next year.
billytickets
Billytickets - 6 years ago
Dave you didnt think on August30th it was a smart idea either.lol

DaveinHackensack (IP Logged)

Date: August 30, 2007 02:07AM


I am not predicting Wal-Mart's "demise", but I don't feel any urge to buy the stock. If I were a portfolio manager with billions of dollars to put to work in dozens of stocks, I could see WMT being a safe choice -- not a lot of downside, probably some upside. Plus, it's almost a form of portfolio insurance: if the stock doesn't do well, then plenty of my peers who own it will suffer too, so in the worst case, it won't hurt my relative performance.

BillyTickets, though, isn't someone who's buying dozens of stocks -- he advocates super-concentrated portfolios comprised of about five stocks. Is Wal-Mart really one of the five best stocks to own right now? I'm not convinced by the essay above, which says nothing about the difference between Wal-Mart's situation today (having essentially saturated the American market for big-box stores and having challenges growing internationally) with its situation during previous years. I'm not sure that simply extrapolating past trends is as helpful here. Much of Wal-Mart's future growth will depend on its success (or lack thereof) with new, untested types of smaller stores.

Also, I wouldn't use predictions of additional buying by guru owners as a reason why you feel there is little downside -- who knows what the gurus will do? They have been known to sell stocks they own as well as buy more of them.

Two other points, while I am continuing my devil's advocacy:

1) Wal-Mart's high debt ($43 billion versus $6 billion in cash) should be taken into account when considering its valuation, earnings expectations, and potential for future buybacks.

2) Wal-Mart's stock price has declined recently despite negligible short interest -- less than 1% of the stock is currently sold short. If short sellers had driven the stock down, at least we'd know they'd have to buy the stock at some point to cover their short positions. By contrast, whoever has been dumping Wal-Mart recently won't have to buy it back.

The fact is WAL MART is one of 3 BIg positions I took this year JNJ is about 11% in about 5 months , BNI is up about 8% in less than a month and WMT is up 13% in about 14weeks.


The stock is not "cheap any more and the 13% made in 14 weeks is like Dave says a Nice hit. What Dave and others "MISSED" is when you buy a QUALITY LARGE CAP CHEAP ENOUGH and the downward pressure"subsides" and You been "watching" that stock for 5 or 6 years you get a "feel" .I loved BRK/b at 3580,MO at 66.67 and KFT at 30.60 and BUD at 48.40 BUT already add so much I didnt add to my positions.they are ALL up significantly BRK is up 40% in past 4 months, MO is up almost 20% in 4 -5 months KFT is up about 15% since august Bud 9% in about 4 weeks. and USG the laggard is up 5% in 3 months

The great thing about being concentrated and watching only 20 stocks or so is that you DEVELOP a feel for when the selling has subsidided and its ready to"turn". Dave from hackinsack John KrantzIammatt and others are "proficient " in watching and picking small caps and I think I've proven I do a great job on large caps as my track record has proven

I have reported what Dave has posted because Dave in Hackensack is a poster in which are styles are different but i have a GREAT DEAL OF RESPECT for him. His posts are always well organized and POSITIVE. I have copied his post because I want to show investors" that buying VALUE even when a stock "looks like it is not spectacular (like Dave made an informed case for NOT picking WMT.) WILL YIELD GREAT RETURNS if BOUGHT RIGHT ( 52% annualized is nothing to "sneeze at")

This post is an illustration on how PROFITABLE it is to get your money in right EVEN with BORING large caps like WMT.Hope this makes some thing clear.peace

DaveinHackensack
DaveinHackensack - 6 years ago
"Dave you didnt think on August30th it was a smart idea either.lol"

Like I said in the post you copied above: "If I were a portfolio manager with billions of dollars to put to work in dozens of stocks, I could see WMT being a safe choice -- not a lot of downside, probably some upside." But also: "I don't feel any urge to buy the stock". I still don't. But you did get a nice hit on it, so congratulations.

Let me pick your brain about something else though. I have two extra Magic Formula buys to make this year, because two of my twenty original picks (both drug companies) got bought out for ~22-24% premiums, and I sold on the news. One of the Magic Formula stocks I am considering is a small cap, but one with an established brand name. It, and other stocks in its sector, have been down this year due to concerns about the economy. Still, I like the company -- good valuation, good profitability, etc. In the time I was looking at it this week, it announced quarterly earnings that beat expectations. Now the stock is up about 15%. Still well below its 52-week high though, and the valuation is still decent. Part of me is tempted to look for something else, because I missed that 15% move, but part of me doesn't want to pass on a good stock by being cheap. I did that when I missed the move from the high 20's to 35 in MRK a year and a half ago, and bought a couple of competitors instead. Have you been in similar situations? If so, what was your response?
tbare06
Tbare06 - 6 years ago
I own a decent stake in Wal-Mart. I have owned this stock for quite some time and believe the long term potential for this company is great. Just go in one, they are always full of people. But I caution anyone who thinks one month of data could suggest the longterm fortune of any company.

Wall Street seems to be pretty down on retail as a whole lately. There are some good deals to be had.
billytickets
Billytickets - 6 years ago
Haha Dave it must "pain" my enemies that someone as bright as you asks "me" specifically what I think .Maybe sandy capone or ccyork or stockdic could help you? lol I couldn't do that with a straight face. Either email me the stocks or mention them on here and ill give you my 2 cents.

I enjoy your devils advocacy you and Iammatt are both intelligent and I enjoy the way you BOTH question me but "respect" me at the same time unlike the haters who are consumed with jealousy. It is because of guys like you and twolvesfan and Gangstarr and iammatt that I post here.
DaveinHackensack
DaveinHackensack - 6 years ago
BillyT,

FWIW, I do find CCYork's and StockDoc's posts worth reading. I can't think of a Capone post off the top of my head, so I can't comment either way on him.

The stock I was referring to before was Korn Ferry International (KFY), the leading staffing/recruiting firm. It's shares had been under pressure due to concerns about the job market next year, but recent job numbers -- and KFY beating the Street's earnings estimates last week -- have driven the stock higher. It's up again today, to over 20 (I was looking at it at 16 and change last week), so I think at this point I will pass on it. But feel free to share your thoughts. Same with CCYork and StockDoc if they're reading this.

By the way: with today's move in FIG, I'm up 13% on it so far, from my average cost of $17.02 (not including the 5% dividend).
DaveinHackensack
DaveinHackensack - 6 years ago
FYI, I bought HSII instead of KFY today, as one of the two Magic Formula buys I made to replace the two pharma stocks I sold when they got acquired. I wrote a post about the two buys on the small cap board.

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