Wal-Mart (NYSE:WMT) shareholders have no reason to fear October. Witches and goblins roaming on the 31st, black cats, and giant spiderwebs are a boon for the nation's largest retailer, and already sales have floated higher in anticipation of Halloween.
This morning, the retailer reported that sales at stores open at least one year are on track to rise 3% to 5% this month, possibly topping last October's 3.7% jump in same-store sales. Halloween product sales -- candy, costumes, lawn decorations, flashlights, batteries, talking pumpkins -- are "meeting expectations."
October is typically a strong month for fall apparel sales, too, and with Target (NYSE:TGT) in its sights, Wal-Mart is aggressively pushing clothing with new initiatives. Although Wal-Mart is by far the largest retailer in the country, accounting for almost 7% of annual U.S. retail sales -- five times the size of runner-up Home Depot (NYSE:HD) -- Target is better known for clothing.
Wal-Mart should see nearly $260 billion in sales this year. As is typical in retail, margins are slim, and the company generated just $3.2 billion in 2002 free cash flow. That hasn't stopped Wal-Mart from being one of the market's best investments the last 20 years, reiterating a valuable lesson: The market loves growth even more than it loves high margins.
At $58, the $257 billion company trades at 28 times this year's earnings estimates and 25 times next year's.
