Yesterday I said the only thing I really cared about was the number of shares Wal-Mart (WMT) bought back in the last three months and a minimum of 22 million shares was the number I was looking for. The results were released today and the share count was reduce from 4,128,0000 shares to 4,102,000 in the last three months for a total 26 million share reduction.
Good, but for some reason I am not totally happy. The reason? They updated their full year guidance for earnings per share from continuing operations for 2008, which now is estimated to be between $3.05 and $3.13. This is down from the initial forecast of between $3.15 and $3.23 per share. Now, this is only a 3% reduction and the market is over reacting today to it like they have been everything else the past month but bad news is bad news.
Here is the thing. Wal-Mart still sits on $6 billion in cash. Why aren't they picking up shares like Eddie Lampert is at Sears Holdings (SHLD)? One would think that Lee Scott would want to announce anything but a EPS decrease at this point. Any goodwill he got at the annual meeting with the shareholder friendly announcements he made is just about wiped out today. Why not accelerate the share repurchases to avoid that announcement? It is not like shares have run up in value to level not seen before, we have seen these levels for the majority of the 21st century.
Wal-Mart announced a $15 billion repurchase plan in June. If they bought back another $6 billion in the remainder of this year, that would reduce the share count by.... 3%! Where have we seen that number before? Oh, yeah, it is equal to the earnings reduction announced today. They could have avoided today's announcement. Now, there is the possibility that Wal-Mart may be doing the old "reduce expectations and then beat them" game but based on it's history, that is not very likely.
I think I am staring to wish Lee Scott was not there again. It has been an 18 month turnaround that looks to have stalled.