Wal-Mart must prove executives right on U.S. recovery

Tue Feb 22, 2011 12:01am EST

* Wal-Mart to report results before market open on Feb. 22     * Wall St expects Q4 EPS $1.31, revenue $117.68 bln     * U.S. sales in the spotlight     By Jessica Wohl     CHICAGO, Feb 22 (Reuters) - Wal-Mart Stores Inc investors are eager to see whether management made good on the claim that the company's biggest business, its namesake U.S. discount chain, would finally see sales turn the corner.     Under Chief Executive Mike Duke and new U.S. chief Bill Simon, the world's largest retailer is stocking more goods and has a renewed focus on consistently low pricing.     Tuesday's quarterly results will show whether the fresh management team at the U.S. discount chain was able to make a difference in the key fourth quarter.     While Wal-Mart has expanded into more than a dozen countries and is ripe for further international growth, the U.S. stores still represent the lion's share of its business.

Nearly 64 percent of its $405 billion in fiscal 2010 sales came from the U.S. discount stores, and they are key to pleasing Wall Street.     "The U.S. business has to remain healthy or the stock price isn't going to be healthy, and that's the trick at this point in time," said Patty Edwards, chief investment officer of Trutina Financial.


Shares of Wal-Mart have risen 2.7 percent since the beginning of the year, trailing gains of about 7 percent in the Standard & Poor's 500 index and the Dow Jones industrial average .     Four analysts have downgraded Wal-Mart's stock since the beginning of 2011. Many said they were concerned about sales at stores open at least a year at its U.S. discount chain.     The company made a bold suggestion in November, when it said fourth-quarter same-store sales at its namesake U.S. stores should rise, even though its official forecast suggested a decline of 1 percent to a rise of 2 percent.     After some tough winter storms and higher food and gasoline prices, Wal-Mart must now show whether such sales grew, or if it chalked up its seventh consecutive quarterly decline.         BIGGEST QUARTER OF THE YEAR     The fourth quarter is Wal-Mart's largest in terms of revenue and profit. Analysts, on average, expect Wal-Mart to post a fourth-quarter profit of $1.31 per share on $117.68 billion in revenue, according to Thomson Reuters I/B/E/S.     Several other U.S. retailers will issue results this week, including Home Depot Inc and Macy's Inc on Tuesday.     Wal-Mart trades at 12.4 times expected earnings, just ahead of smaller rival Target Corp's 12.2 times expected profit. Target is due to report results on Thursday.     Wal-Mart is reasonably valued at that level, which is below its five-year average of 14.1 times expected earnings, according to JP Morgan analyst Charles Grom, who downgraded the stock to "neutral" earlier this month.     Analysts and investors want to hear more about Wal-Mart's plans to enter more cities, such as New York, with small stores.     Meanwhile, Wal-Mart stands to benefit if shoppers choose to buy more groceries at its stores as prices rise. As the largest U.S. grocery retailer, it must react to chains such as Family Dollar Stores Inc selling more food as prices for groceries and gasoline pressure low-income shoppers.     "This theoretically could be one of those times when Wal-Mart could win but it depends on how they've played their hands and I'm just not 100 percent certain that they've really played this one as well as they could have," Edwards of Trutina Financial said.  (Reporting by Jessica Wohl; Editing by Richard Chang)  

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (3)
madmilker wrote:

“It is the aim of good government to stimulate production, of bad government to encourage consumption.” – Jean Baptiste Say

If Retail makes NOTHING….and Government makes only MORE DEBT….the only thing that can have a positive effect on communities is Small Business and companies that make stuff.

The picture of George Washington can float around a town six to eight times before leaving the community but if that dollar is spent inside of a big box store it will leave the same day that it entered.

Big Box stores like Wal*Mart can take in 200,000 George Washington’s a day and that be a lot of “Liberty” “Pride” “Freedom” leaving town each day.

And when one figures into the equation America has a six to one trade deficit with China which means five out of every six George Washington’s that go there will never come back unless the US Government sells bonds(debt) this is what those on Jenkins Hill and Wall Street don’t understand when it comes to local banks not having any George Washington’s to loan out in their communities.

Why is it that people ain’t writing articles about those fifteen cargo ships that pollute as much as 760 million automobiles, T Boone Pickens owning a Texas Water District, Nestle draining the Great Lakes, the disconnect between Coca-Cola and the people of India, Wal*Mart putting less than 5% foreign in their stores in China and Warren Buffett buying a Choo Choo train a few years after Wal*Mart makes a deal on a port in Mexico.

In 1960 U.S. goods manufacturing produced a $5 billion trade surplus – - 2006 merchandise trade had a $836 billion deficit. Today, for some reason, the world thinks the American consumer needs to support what they make….well, it doesn’t work like that even a fifth grader can figure that out.

So-call cheaper items only breed cheaper wages and this will go on until the rich of the world carry out the manufacturing of ignorance through out the 182 or so counties that will have a chance to make something.

I’m just an O’fart with very little book learning but from what I’ve seen over the past sixty five years in this great union of fifty states has shown me that common sense left in the year 63′ and “my sh!! don’t stink” sense as been here every since.

Sad, those few fat farmers with penmanship of poets holding feather quill goose pens and writing the American dream has today become nothing more than a page within a history book that a bunch of asinine dipsticks are to lazy and ignorant to teach.

Over the past 100 years the Federal Debt has gone from $2.6 billion in 1910 to over $14 trillion today….In that time there has only been one 10 year period that the debt has gone down 1920-1930.

All done by a bunch of elephants and jack@sses acting like turnips. People today still think Clinton balance the budget but anyone knows if they think with an open mind that if the budgets of the Clinton years had been balance the debt would had not gone up.

America is over $57 trillion in debt and it didn’t get there by people using common sense. If the American people don’t wake-up to that fact within another twenty years they will witness Lady Liberty kneeling to her knees in the Hudson and someone in Tiananmen Square holding that tablet from under her left arm celebrating what is written upon it.

Feb 22, 2011 12:34am EST  --  Report as abuse
DrJJJJ wrote:
Agree with much of what you say! To increase sales, Walmart should embrace local small business products geared more toward their immediate market/store (like local health food, etc) and brag/advertise it! Feature an area made locally and promote it! It is a world maket place now like it or not, we’re not the low cost producers of much and nearly every US fortune 500 company now is surviving on exports believe it or not-with American workers producing the goods and services for the most part! Deflation is just beginning and it’s lonely at the top! Reducing wages will take a miracle in the public sector in particular and we’re in denial about the magnitude of our debt, so prepare for things to get ugly, but act civil-a nation divided falls!

Feb 23, 2011 5:18pm EST  --  Report as abuse
“The U.S. trade deficit is a bigger threat to the domestic economy than either the federal budget deficit or consumer debt and could lead to ‘political turmoil.’ Pretty soon, I think there will be a big adjustment.” — Warren Buffett

An Inflation-Neutral Balanced Trade System (BTS), inspired by Warren Buffett’s 2003 Import Certificate Plan is introduced at the top of page 4 of the Pdf, which is available at:


Feb 27, 2011 10:06pm EST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.