Last quarter, investors threw shares of Wal-Mart
Wal-Mart’s second-quarter income from continuing operations increased 5.7% to $4 billion, or $1.18 per share. Net sales increased 4.5% to $113.5 billion; without negative drag from currency exchange rates, sales would have been $115.7 billion.
The closely watched same-store sales figure here in the U.S. was 2.2%, reflecting both positive ticket and traffic numbers.
Still, analysts expected Wal-Mart to ring up more sales than it did; the consensus expectation was for comps to grow 2.7%, and Wal-Mart guided for 4% to 6% growth.
On a macro level, many pundits see Wal-Mart’s slower-than-expected sales figure reflecting a negative outlook for U.S. consumers. Granted, there are good reasons to be worried.
The economic recovery hasn’t exactly been robust, and public and private entities continue to lay off thousands of American workers. For example, Research in Motion
You’d think such blows to American consumers’ discretionary income would have great potential to boost Wal-Mart’s fortunes -- it is a deep discounter after all -- but that simply wasn’t the case when recession hit hard several years ago. Wal-Mart has struggled terribly over the course of the ensuing years, failing to attract more customers, despite the fact that more Americans were trying to be frugal.
Somehow, more upscale discounters like Costco
Last but not least, rumors are swirling that the bribery investigation that’s still hanging over Wal-Mart could travel to countries beyond Mexico, and could extend to allegations of money laundering and tax evasion, too.
Wal-Mart’s simply not a shoo-in for a robust recovery here in the U.S. at this time, and the uncertainty from the bribery scandal makes the situation even worse. Leave shares of Wal-Mart on the shelf; like cheese puffs, they’re puffed too high with air, and may prove far more expensive than investors currently believe, as these elements play out.
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Alyce Lomax does not own shares of any of the companies mentioned. The Motley Fool owns shares of Costco Wholesale. Motley Fool newsletter services have recommended buying shares of Costco Wholesale. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.