Wal-Mart report should give clues on fiscal year
NEW YORK (Reuters) - Wal-Mart Stores Inc.(WMT.N) investors will be focused on the retailer's forecast for its new fiscal year and indications as to when sales at its U.S. store base may finally strengthen when the world's largest retailer reports fourth-quarter results on Tuesday.
Wal-Mart ended its fiscal year on January 31 after posting a string of paltry sales gains at its U.S. stores open at least a year, including a 0.1 percent decline in November.
In the face of store remodeling projects, limited opportunities for U.S. growth, problems with its apparel offerings and a recent drop in temperatures that could pinch shoppers when heating bills roll in, investors are wondering when it U.S. business will get back on track.
"That's the $64,000 question," said Patricia Edwards, a portfolio manager with Wentworth, Hauser and Violich, who tracks retail companies.
ABOUT FACE
The retailer has already forecast tepid gains for February, saying it expects U.S. same-store sales to rise 1 percent to 2 percent. Smaller rival Target Corp. (TGT.N) expects February sales at its stores open at least a year to rise 4 percent to 6 percent.
If the forecasts hold, Target's same-store sales gains would have exceeded Wal-Mart's in 42 of the last 43 months, according to ThinkEquity Partners.
"It looks to me like Target is humming on all cylinders," said James Hardesty, president of Hardesty Capital Management, which owns Target shares. "They've found a niche that is above the discount chains, but below the high-end franchise department stores."
Wal-Mart is struggling as it has tried to widen its niche.
Last year, it downplayed its discount roots to try to expand its image beyond that of a low-priced retailer. It stocked more upscale items such as organic food and plasma TVs, hoping wealthier shoppers would spend more in its stores.
But its lower-income customers balked at some of the changes and, in the face of disappointing sales, Wal-Mart vowed its "most aggressive pricing strategy ever" for the holidays.
"Getting back to really every day low prices and making sure we were the price leader," said Charles Holley, Wal-Mart's treasurer, at a Citigroup conference this week. "That was very important to us in the fourth quarter."
In January, Wal-Mart maintained its fourth-quarter earnings forecast of 88 cents to 92 cents per share. Analysts, on average, expect it to earn 90 cents per share, according to Reuters Estimates.
MEETING EXPECTATIONS?
J.P. Morgan analyst Charles Grom, in a note on Friday, said he expects Wal-Mart to report quarterly earnings in line with expectations, helped by better inventory and labor management. Continued...
