One of my favorite segments on Comedy Central's The Showbiz Show is a segment done by professional smart-aleck David Spade. Titled "While You Were Working," it recaps the week's Hollywood trivia for the benefit of viewers who work for a living -- and haven't the time to keep abreast of Tinseltown happenings on their own.
Why do I mention this? Because here at the Fool, we also know that you've got a life. Between working while the sun shines and watching The Showbiz Show when it doesn't, you may find it hard to keep up to speed on Wall Street events -- company "investor conferences," for one thing.
Why the quotation marks?
Because while these conferences ostensibly aim to benefit you, the investor, companies know darned well that you don't have the time to listen in to the webcasts, much less actually attend the things. Yet it's rare that they take the time to transcribe the events and file them with the SEC so that you can find out what happened while you were, you know, working. That's where the Fool comes in -- and more specifically, it's the raison d'etre of our "Fool on the Street" series.
So without further ado ...
In today's segment, we recap the news from megaretailer Wal-Mart's (NYSE:WMT) June 19 presentation at the William Blair & Company Growth Stock Conference. CEO Lee Scott was busy putting up drywall at a remodeled supercenter at the time (I presume), so in his stead, he sent Chief Administrative Officer John Menzer to give a talk on the company's business.
As usual at these events, Menzer's talk ranged far and wide. To keep this column short and sweet, and to help you make the best use of your reading time, I'll focus on the three most important subjects in nice, bite-sized segments.
The international story
As president and CEO of Wal-Mart International from 1999 to 2005, Menzer has thoughts that naturally ran to Wal-Mart's international operations. I suspect it also didn't hurt that Wal-Mart's international story is its most attractive. Speaking of which, if you were wondering what 62-year-old Wal-Mart was doing at a "growth stock" conference in the first place, this is the paragraph that will answer your question. You see, while the larger entity marches forward at a respectable but hardly roadrunner-esque growth rate (about 11.3% compounded over the last seven years), younger Wal-Mart International has torn up the track -- growing its sale at 27.4% compounded.
Skimming along the list of Wal-Mart's international locales, Menzer described them as follows:
- Up to our north, Wal-Mart has opened its first seven supercenters in Canada. According to Menzer: "They're doing very well."
- A bit further south, Wal-Mart is "kind of on a roll right now in Brazil."
- Hopping across the pond, Menzer said Wal-Mart's Asda subsidiary in the U.K. had a "very strong" 2006. "Earnings picked up and we're gaining market share significantly."
- Further east, Wal-Mart now boasts 78 supercenters in China, and he says that the supercenter is its "leading format in China."
- Another skip 'cross-water, and we find: "Sales and operating profit in Japan are improving, but it is a slow market to change."
- And finally, turning back west, Menzer concluded: "India. Not too much to report yet, but we have signed a memo of understanding to enter India."
So in general, optimism prevails internationally, but we got little to sink our teeth into there. In contrast, nitty-gritty details were found in abundance in ...
The U.S. story
Here's where Menzer really hit his stride, speaking confidently about several of the key elements in the company's plan to revive its growth. Some factoids were pretty corollary to the big picture, such as his touting the firm's new electronics offerings from Dell (NASDAQ:DELL), Visio, Phillips (NYSE:PHG), and eBay's (NASDAQ:EBAY) Skype. But more importantly, Menzer gave investors specific items to focus on in evaluating the company's turnaround. The three most important and quantifiable ones being:
• Wal-Mart is "very focused on improving our sales comps in the United States. ... The key element that you take away from this [presentation] would be, No. 1 ... a focus on improving comp sales [emphasis added]."
• "Our company goal is to grow our inventory at one half the level of sales. Last year, we really surpassed that. Inventory grew about 2% and sales was 7.8%. First quarter this year wasn't as good."
• In home furnishings and apparel: "We're increasing our own market share within our company in direct imports and that will continue. We have a long way to go, we think, in driving that, helping our sales and helping our overall margins."
So to recap, investors want to focus on three key metrics going forward: (1) same-store sales (OK, that's a given), (2) growth in sales on the income statement, relative to growth in inventories on the balance sheet, and, finally, (3) margins.
Compressing expansion
The final subject I'll address actually ties into the last one, and, specifically, Wal-Mart's "key element" of growing same-store sales. Using the calendar as a tool to this end, Wal-Mart plans to "front-load" its new store openings. It will open new stores only between March and October (fiscal quarters 2 and 3, and part of Q1 as well) -- the aim being to allow management to focus on driving sales in the holiday season of Q4, in hopes of growing same-store sales in this key quarter. Management will then use the relative "downtime" of the remaining three quarters to worry about opening up new storefronts.
I guess it's worth a try.
Wal-Mart and Dell are both Inside Value recommendations. Dell and eBay are both Stock Advisor selections. Both newsletters outperform the market and both are available for a free 30-day trial.
Fool contributor Rich Smith has no position in any of the companies mentioned in this article. If he did, The Motley Fool would require him to tell you so. We're sticklers about things like that.
