* What: Wal-Mart's U.S. same-store sales in focus
* When: Wal-Mart reports Q4 results on Feb. 22
* Why: Wal-Mart predicted U.S. same-store sales would rise
By Jessica Wohl
CHICAGO, Feb 10 It may take Wal-Mart Stores Inc
(WMT.N) more time than it expected to increase sales at
existing U.S. stores, adding pressure to the world's largest
retailer and its stock price.
In mid-November, Wal-Mart was giddy about its prospects. It
said U.S. sales at its discount stores open at least a year
should finally rise after six consecutive quarterly declines.
A strong showing early in the holiday season buoyed those
expectations, as the retailer's return to selling a wide
variety of discounted goods appeared to be paying off.
Then, several major snowstorms and frigid weather blanketed
the country, forcing some shoppers to stay home. Competitors
such as Target Corp (TGT.N) said that those who made it to
stores hunted for basics like food, bargains and little else,
and gas prices rose, adding strain to those on tight budgets.
Now, as Wal-Mart prepares to report its quarterly results
on Feb. 22, some question whether it can return to sales growth
in its domestic discount chain, its largest business.
"Everybody is sensitive to the sales number," said Gilford
Securities analyst Bernard Sosnick. "Whether or not it is
caused by the weather, if it comes up short the stock is going
to feel a setback."
Wal-Mart officially forecast fourth quarter same-store
sales in the range of a 1 percent decline to a 2 percent rise.
But back in November, then-CFO Tom Schoewe said that he was
confident the company would report an increase. [ID:nN1691422]
Some analysts expect Wal-Mart to miss that goal. Among them
is UBS analyst Neil Currie, who cut Wal-Mart to "neutral" from
"buy," saying the sales recovery could take time.
Currie now expects that same-store sales at Wal-Mart's U.S.
discount stores fell 0.8 percent, down from a prior forecast of
a rise of 0.3 percent. [ID:nSGE71909O]
Analysts polled by Thomson Reuters, excluding UBS's Currie,
call for sales to rise 0.5 percent to 2 percent, with an
average target of a 0.8 percent increase as of Wednesday.
Such sales fell 2 percent a year earlier, and have fallen
in smaller percentage terms in each quarter since then.
For a graphic of Wal-Mart and Target's sales performance,
click here: r.reuters.com/hab97r
TARGET ALREADY CALLED OUT WINTER WOES
Target releases monthly sales reports, a practice Wal-Mart
abandoned in 2009. After topping expectations in November,
Target admitted that same-store sales gains in December and
January came in below its expectations.
That pressure has been priced into its stock. Target shares
fell 8.5 percent from the beginning of the year through
Wednesday, while Wal-Mart shares climbed 5.2 percent. Wal-Mart
trades at a slightly higher price-to-earnings ratio than its
However, shares of Wal-Mart were down 2 percent in
afternoon trade on Thursday after the UBS downgrade.
"In the near term you're probably going to see that the
stock could stagnate here," said Channing Smith, managing
director at Capital Advisors Growth Fund, which owns Wal-Mart
shares and has about $857 million in assets under management.
Under Chief Executive Mike Duke and new U.S. chief Bill
Simon, Wal-Mart has sharpened its focus on its core customers,
who are shopping as soon as they get their paychecks and
generally sticking to what they need. It also just named a new
chief merchandising officer, Duncan Mac Naughton, who has a
long tenure in the grocery business. [ID:nN28108007]
Smith is confident in Wal-Mart's longer-term prospects,
expecting a U.S. rebound with the new plans in place and
continued strength in the international business. He expects to
see "very good growth starting this year and then really
accelerating in the coming years."
It may have been tough for shoppers in suburban and rural
areas to drive to Wal-Mart stores as blizzards and other harsh
weather hit the country.
UBS's Currie cited a survey of more than 200 Wal-Mart
parking lots which showed they were progressively emptier in
November, December and January than they were a year earlier.
Plus, an analysis from Global Hunter Securities showed that
Wal-Mart shoppers were more likely than those surveyed at 11
other chains to cut back on driving due to higher gas prices.
Meanwhile, dollar stores, which are smaller and dot more
urban neighborhoods, have lured shoppers with a wider variety
of brand name goods. Family Dollar Stores Inc FDO.N has
posted 10 consecutive quarters of same-store sales growth.
(Reporting by Jessica Wohl, additional reporting by Renju
Jose in Bangalore; Editing by Bernard Orr)