Some comments on Wal-Mart (NYSE:WMT) and Black Friday:
- JP Morgan notes WMT posted a negative 0.1% SSS in November - its first monthly comp below 0% in 10+ years (April 1996 @ -0.6%, Easter shift driven). While the results were more/less in-line with expectations (guidance of "flat"; JPM at +0.5%) the firm continues to scratch their heads as to why sales are not improving provided the precipitous drop in gas prices and stable consumer confidence levels. All in, they remain skeptical on the company's ability to change its image on a dime and with this in mind they'll stay Neutral.
While the stock's absolute/relative underperformance over the past 5 years (cumulative loss of ~34% vs. SandP 500 down ~8%) has tempted the firm to get bullish, they do not see a positive catalyst on the horizon. Moreover, while much of the bullish sell-side view emphasizes valuation (trading at a noticeable discount to historical average - resting at 14.9x 2007E EPS, a 33.1% discount to its10-year average), they actually think the stock has been accurately "revalued" by the market given WMT's 1) slowing comp trends, 2) aggressive commitment to sq. ft. growth, 3) augmented risk profile (e.g., merchandise makeover, international expansion, field level management changes), and 4) uninspiring margin performance.
- UBS notes they are somewhat surprised by WMT's Nov. sales given what appeared to be both a conservative plan (which factored in current co.-specific headwinds) and an early/aggressive push for holiday sales. Firm's Blitz day store visits revealed brisk traffic and strong sell-through of special offer items. Perhaps the multitude of rollbacks at WMT did not have the desired, broad shopping effect. Firm thinks this news could result in further near-term weakness in WMT shares.
- Banc of America believes WMT's November weakness was the result of two issues. 1) There simply are not enough registers and parking lots. This time of year, the stores are at or near capacity and it is to difficult to make up for lower prices with enough increased traffic in the month. 2) The aforementioned apparel fashion miss, which hurt October as well as November. Firm believes they were willing to sacrifice the weak November sales, especially considering the weak fashion statement they were making, to try and refocus customers on WMT as the price leader for the holiday season. Believes they guide to 1-3% comps for December, and expects them to hit the high end of the estimate.
Consumer electronics sales were strong this weekend. Contacts that the firm was able to get in touch with, were very bullish about Black Friday and Saturday sales. For BBY and CC, this bodes well. They believe the struggle for both is making up for the accelerated price declines with enough incremental unit growth. At least for the weekend, the firm thinks they succeeded.
- CIBC notes their Black Friday morning store checks in three areas indicated that consumer
electronics retailers are clearly winning wallet share. Home goods and furnishing stores saw less traffic in general. Firm continues to favor BBY and CC and see challenges for WSM.
Crowds were overwhelming at both BBY and CC. At the NYC 86th St. location, we could not even enter the CC store. At BBY, best deals were Insignia (BBY's own) items which were popular in baskets. CC also had long lines for in-store pick-up of on line purchases.
Low traffic in Williams-Sonoma, Pottery Barn, PB Kids and PB Bed & Bath. Generally no deals at WS, PB Kids and PB B&B. BBBY stores were relatively quiet in all locations. Holiday spirit not as strong as WSM stores but holiday decor items definitely available and featured near front of store. Pier 1 Imports was very promotional with full blown holiday sets but again no traffic.
Notablecalls: The consumer is NOT bent up, it's spent up. Not enough registers and parking lots at WMT? What? You're kidding me? I'm not overly negative on the stock, though. Would not be surprised to see a bounce following initial weakness as the negative comps were pretty much expected already. There are some negative comments on the generic program but one should consider the fact it was just rolled out and will take some time to find traction.
- JP Morgan notes WMT posted a negative 0.1% SSS in November - its first monthly comp below 0% in 10+ years (April 1996 @ -0.6%, Easter shift driven). While the results were more/less in-line with expectations (guidance of "flat"; JPM at +0.5%) the firm continues to scratch their heads as to why sales are not improving provided the precipitous drop in gas prices and stable consumer confidence levels. All in, they remain skeptical on the company's ability to change its image on a dime and with this in mind they'll stay Neutral.
While the stock's absolute/relative underperformance over the past 5 years (cumulative loss of ~34% vs. SandP 500 down ~8%) has tempted the firm to get bullish, they do not see a positive catalyst on the horizon. Moreover, while much of the bullish sell-side view emphasizes valuation (trading at a noticeable discount to historical average - resting at 14.9x 2007E EPS, a 33.1% discount to its10-year average), they actually think the stock has been accurately "revalued" by the market given WMT's 1) slowing comp trends, 2) aggressive commitment to sq. ft. growth, 3) augmented risk profile (e.g., merchandise makeover, international expansion, field level management changes), and 4) uninspiring margin performance.
- UBS notes they are somewhat surprised by WMT's Nov. sales given what appeared to be both a conservative plan (which factored in current co.-specific headwinds) and an early/aggressive push for holiday sales. Firm's Blitz day store visits revealed brisk traffic and strong sell-through of special offer items. Perhaps the multitude of rollbacks at WMT did not have the desired, broad shopping effect. Firm thinks this news could result in further near-term weakness in WMT shares.
- Banc of America believes WMT's November weakness was the result of two issues. 1) There simply are not enough registers and parking lots. This time of year, the stores are at or near capacity and it is to difficult to make up for lower prices with enough increased traffic in the month. 2) The aforementioned apparel fashion miss, which hurt October as well as November. Firm believes they were willing to sacrifice the weak November sales, especially considering the weak fashion statement they were making, to try and refocus customers on WMT as the price leader for the holiday season. Believes they guide to 1-3% comps for December, and expects them to hit the high end of the estimate.
Consumer electronics sales were strong this weekend. Contacts that the firm was able to get in touch with, were very bullish about Black Friday and Saturday sales. For BBY and CC, this bodes well. They believe the struggle for both is making up for the accelerated price declines with enough incremental unit growth. At least for the weekend, the firm thinks they succeeded.
- CIBC notes their Black Friday morning store checks in three areas indicated that consumer
electronics retailers are clearly winning wallet share. Home goods and furnishing stores saw less traffic in general. Firm continues to favor BBY and CC and see challenges for WSM.
Crowds were overwhelming at both BBY and CC. At the NYC 86th St. location, we could not even enter the CC store. At BBY, best deals were Insignia (BBY's own) items which were popular in baskets. CC also had long lines for in-store pick-up of on line purchases.
Low traffic in Williams-Sonoma, Pottery Barn, PB Kids and PB Bed & Bath. Generally no deals at WS, PB Kids and PB B&B. BBBY stores were relatively quiet in all locations. Holiday spirit not as strong as WSM stores but holiday decor items definitely available and featured near front of store. Pier 1 Imports was very promotional with full blown holiday sets but again no traffic.
Notablecalls: The consumer is NOT bent up, it's spent up. Not enough registers and parking lots at WMT? What? You're kidding me? I'm not overly negative on the stock, though. Would not be surprised to see a bounce following initial weakness as the negative comps were pretty much expected already. There are some negative comments on the generic program but one should consider the fact it was just rolled out and will take some time to find traction.
1 comment:
Picking up some WMT here may make sense in the ST.
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