Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.
The market will be following Federal Reserve chair nominee Janet Yellen's appearance before the Senate Banking Committee today. In the meantime, stocks are little changed this morning, with the S&P 500 and the narrower, price-weighted Dow Jones Industrial Average (DJINDICES:^DJI) both within a few points of breakeven as of 10:20 a.m. EST.
In prepared remarks, Yellen will say the current unemployment rate reflects "a labor market and economy performing far short of their potential." By the end of this week, we'll have a better read on consumers' willingness to part with their cash as major retailers report third-quarter results in the run-up to the holiday period. This morning, it was the turn of Dow component Wal-Mart (NYSE:WMT) and Kohl's (NYSE:KSS), and the initial verdict isn't all that encouraging.
Wal-Mart did beat Wall Street expectations on earnings, posting earnings per share of $1.14 -- a penny above the consensus estimate. However, revenue came in a bit light at $114.9 billion against $116.8 billion (although the "miss" doesn't appear all that significant: On a constant-currency basis, total revenue would have been $116.2 billion, only a half-percent short of the forecast). Total U.S. same-store sales, excluding fuel, declined by 0.1%.
That has not gone unnoticed in Wal-Mart's executive suites, with CEO Mike Duke saying, "Our most important priority is growing top-line sales, including comp sales." But don't count on significant improvement in the immediate future -- the company expects relatively flat same-store sales at U.S. Wal-Mart locations in the current quarter. As Duke went on to say, "The retail environment, both in stores and online, remains competitive." That's never more true than during the holiday shopping season, when the game of one-upmanship between retailers to attract traffic -- and customer dollars – reaches a feverish pitch.
The retailer offered a disappointing guidance for the current quarter: The range for adjusted EPS of $1.60-$1.70 did not compare all that favorably with analysts' estimate of $1.69. The $1.14 Wal-Mart just reported for the third quarter was right in the middle of the $1.11-$1.16 range it had provided back in August. Wal-Mart's shares are up 0.2% so far today.
Meanwhile, Kohl's stock is taking a beating today. The shares are down 8.3% after the company missed analysts' $0.86 EPS projection, coming up with just $0.81. As with Wal-Mart, guidance for the current quarter of $1.59-$1.74 did not compare well to analysts' estimate of $1.70 and is based on expected total sales declines of 2% to 4% and comparable-store declines of 0% to 2%. Ouch! It doesn't look like either of these retailers will have all that much to celebrate this holiday season.