Wal-Mart "Missed"?

7 Aug 7:53am
Posted by ToddSullivan
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So, in June Wal-Mart (WMT) forecast July same store ales to rise 2% to 4%. Today they announced they came in at 3%, this is bad. Only on Wall St.

Net sales grew 9.4% overall (Wal-Mart 6.7%, Sam's 7.7% and International Stores 17%). Not bad for a company selling $1 billion dollars a day of merchandise.

"Walmart's clear price leadership position continues to meet the needs of our customers in a difficult economy," said Eduardo Castro-Wright, Walmart U.S. president and chief executive officer. "Better merchandise presentation, our everyday low price message and an improved store experience resonate with customers. With the end of the stimulus checks, we know consumers are spending more cautiously, and we continue to see a pronounced paycheck cycle at the end of the month. We also continue to see improvement in our customer traffic, relative to last year."

The big news is the customer traffic increasing relative to last year. With virtually every other retail operation out there experiencing declines (Sears (SHLD), JC Penny (JCP), Macy's (M), etc.) the fact Wal-Mart is selling more to more people should please shareholders.

The fact some people are gnashing teeth and calling for the "end of days" over the fact sales came in at .4% less that predicted (not by the company, by the "analysts")is proof investors and the media are currently in a hyper reactive mode. Was the report great? No. Was it bad? Not by a long mile. Had they missed their own projections, that would have been bad. Nailing it right in the middle is good, no way around it.

From the "perfect timing" department regarding analysts posts. Check out Jeff Mathews this morning. Jeff points out, "Friedman Billings, it seems, is throwing in the towel and downgrading insurance has-been AIG (last trade, $29), cutting their price target from $53 to $38." Until this morning they still "expected" AIG to hit $58 in a year, a price it likely will not see the remainder of the decade.

The moral of the story is here is what matters is how companies perform based on their own projections because we all know expectations are rarely very accurate...

Mr. Market is a fickle dude..

Guidance

"We believe our businesses are well positioned for the current economy," said Tom Schoewe, executive vice president and chief financial officer. "We estimate U.S. comparable store sales, excluding fuel, for the August four-week period to be between one and two percent, because we still see sales volatility from week to week, especially around paycheck cycles."

Anyone want to bet Wal-Mart is lowering projections to avoid the current scenario next month? Now Wall St. will lower "estimates", Wal-Mart will beat them and everyone will be happy.....strange stuff.


Disclosure ("none" means no position):Long WMT, SHLD, none

Todd Sullivan's- ValuePlays

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About

ToddSullivan

A Massachusetts based value investor, I look for companies whose current valuation is at a discount to their true value. When I purchase a stock, my typical holding period is several years. I consider buying a stock purchasing a piece of a business. I am confident once I make a decision to buy that eventually the market as a whole will recognize the true value of the business and value it accordingly. It may take 1 month, 6 months or a year, but if I buy it at enough of a discount to its true value my results will be (and have been) superior to the market as a whole. Of all the disparate investing disciplines, value investing has stood the test of time. The great investors of have all been value investors. Warren Buffett, Ben Graham, Bill Ruane (Sequoia Fund), Bill Miller and Wally Weitz, all have consistently outperformed the market for decades by using various forms of value investing. Currently I am a contributing writer to Seeking Alpha, Vinvesting.com, The Stock Masters and Value Investing News. Posts have been reprinted in The Wall St. Journal, Yahoo Finance, Google Alerts, Google Finance, TheStreet.com. 24/7 Wall St. and Topix.net.

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