Friday, September 7, 2007

Wal-Mart: Still Going Stong

Wal-Mart (WMT) released sales for both August and the first 30 weeks of the year yesterday and the news was good. I am going to focus on the 30 week financial numbers because they iron out any monthly irregularities that may skew results month to month. So, the 30 week sales increase breakdown looks like this: Wal-Mart stores +6.3%, Sam's Club +7.0%, International Operations +16% and Total Company up 8.3% YTD. When you consider all the doom and gloom surrounding the stock this year, if one was to look at these numbers, one might wonder what the fuss is all about.

The monthly summary is as such: (Total Company up 9.3% in August)

Wal-Mart Stores +7.8&

Back-to-school categories drove sales during the four-week August period at Wal-Mart Stores U.S. In the general merchandise area, back-to-school categories had solid sales performance, with strength in electronics, school supplies and children’s apparel. Sales of laptops and calculators did well, as families prepared for later school start dates in some states such as Florida and Texas. Back-to-college essentials and “rollback” features helped increase sales in domestics, including bedding, bath towels and plastic storage and organization items.

“We are pleased with our performance during August, because it reflects continuing momentum in grocery and electronics. Home and apparel are expected to continue improving into the fourth quarter,” said Eduardo Castro-Wright, president and chief executive officer of Wal-Mart Stores U.S.

Sam’s Club +6.2%
Sam’s Club’s sales for the four-week period were driven by increases in average ticket with both business and Advantage members. Sales among small business members continued to be strongest. Similar to the prior four-week period, sales in electronics, fresh food and grocery were strengths. Hotter weather positively impacted sales of some seasonal items.

International +15.1%

During the August period, Brazil and the United Kingdom continued their recent positive performance. Brazil sales continued to improve ahead of the market, mainly driven by a stronger price position, assortment that is customized to the local community and a recovery of disposable income. Asda continued to gain market share during August. Macroeconomic factors contributed to a slowdown in sales in Mexico during the period.

Now, much has been said about the economy and retail recently. It appears, based on these results that folks are turning to the more affordable alternative and the first to come to mind is always Wal-Mart. Particularly of interest is the growth yet again in electronics. If Wal-Mart can make serious headway into the electronics market, and it appears they are, this will by default aid other sales items. Becoming a destinations place for electronics is a factor that I think is not being fully realized by the market at this point. This is probably due to Lee Scott still sitting in the CEO chair and as more time goes by I am becoming more convinced that fact is weighing on the stock more than the performance of the company. Wal-Mart seems to be playing catch up way to often lately and this is a very bad thing for a company that essentially re-wrote the retail handbook.

As a shareholder I am very encouraged by Wal-Mart's results, imagine what it could do if it was run well? Someday it will be.

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