Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Wigging Out Over Wal-Mart

Wal-Mart (NYSE: WMT  ) may have reported a very nice quarter, but it's the discount retailer's short-term outlook that's causing some investors to balk today.

Second-quarter net income increased 6.9% to $3.02 billion, or $0.76 per share. Revenue jumped 10.3% to $95.3 billion. Same-store sales in the U.S. jumped 2.9%, versus a 0.6% increase this time last year; accounting for fuel, they jumped 3.3%.

Like Costco (Nasdaq: COST  ) and McDonald's (NYSE: MCD  ) , Wal-Mart has been able to buck some of the trends related to the weak American consumer, providing inexpensive wares for penny-pinching shoppers. (On the other hand, I've found it surprising that rival Target (NYSE: TGT  ) hasn't seemed to make too much headway in this economic climate.)

At any rate, though, investors aren't as excited about Wal-Mart today as they had been in recent months. (After a malaise spanning from about 2004 through most of 2007, Wal-Mart shares started showing signs of life last September, and in fact, they're up 44% over the past six months.) Wal-Mart's cautious outlook for the second quarter has given some investors reason to get a bit squeamish about the company.

In Wal-Mart's press release, Chief Financial Officer Tom Schoewe said that it's "difficult to quantify the impact on U.S. sales from the stimulus payments," and gave guidance for earnings of $0.78 to $0.81 per share in the second quarter. Analysts were expecting $0.81 per share, so Wal-Mart may miss next time it reports.

Still, it doesn't seem like a good time to underestimate Wal-Mart. The company's caution given an uncertain economic environment seems prudent, and of course, it makes sense that maybe the company has little sense of what consumers might do with their tax rebates -- there are a lot of options beyond shopping at Wal-Mart, such as saving the money or paying off debt.

However, one thing we do know for certain is that with consumers being increasingly careful with their money, Wal-Mart's most certainly in its element right now (and the fact that it has worked hard on trying to think outside the box may be helping, too). Despite the discounter's rather cautious second-quarter guidance, today's bearishness on Wal-Mart seems like an overreaction. 

Read/Post Comments (0) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 644050, ~/Articles/ArticleHandler.aspx, 10/20/2016 5:50:25 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,162.35 -40.27 -0.22%
S&P 500 2,141.34 -2.95 -0.14%
NASD 5,241.83 -4.58 -0.09%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/20/2016 4:03 PM
WMT $68.73 Down -0.16 -0.23%
Wal-Mart Stores CAPS Rating: ***
COST $150.04 Up +0.59 +0.39%
Costco Wholesale CAPS Rating: ****
MCD $110.57 Down -0.69 -0.62%
McDonald's CAPS Rating: ***
TGT $67.71 Up +0.18 +0.27%
Target CAPS Rating: ***