Savior of the penny-pinching housewife, bane of the small-town shopkeeper, and favorite customer to just about every factory in China, the world's biggest retailer is gearing up to report its fiscal third-quarter 2008 earnings numbers on Tuesday. Who are we talking about? Wal-Mart (NYSE:WMT), of course.

What analysts say:

  • Buy, sell, or waffle? Twenty-six analysts monitor the bully from Bentonville, three more than last quarter. Eighteen of them rate the stock a buy, seven more a hold, and one a sell.
  • Revenue. On average, they're looking for sales to grow 9% to $91.72 billion.
  • Earnings. Profits are predicted to rise 8% to $0.67 per share.

What management says:
Along with everyone else in Retail World, Wal-Mart reported its October sales yesterday, and the news was not good. Total sales rose 8.4% in October (versus October of last year) -- showing a deceleration from the year-to-date performance of 8.6% sales growth. And the most-watched statistic, same-store sales, showed a meager 0.7% gain for the month, or just half the rate that Wal-Mart had clocked year to date.

It was a miserable performance, but par for the course. According to media reports, the retail industry in general reported its worst October sales in 12 years. You couldn't throw a brick in a shopping mall without hitting a store that underperformed expectations. Among the big-name retailers, only a handful of firms bucked the trend, with Costco (NASDAQ:COST), BJ's (NYSE:BJ), and Target (NYSE:TGT) producing better-than-expected same-store sales growth of 9% 4.8%, and 4.1%, respectively.

What management does:
Before you try to jump out a department-store window, though, remember that the long-term picture at Wal-Mart isn't nearly so bad. A retailer simply doesn't get to become the world's biggest retailer without knowing a thing or two about business. Take a gander at Wal-Mart's rolling margins. For more than a year of rough-and-tumble retailing, gross margins have stuck tight to the 24.2% level. Granted, the operating margin is starting to show signs of weakness, but on the bottom line, Wal-Mart's net has held up just fine.

Margins

4/06

7/06

10/06

1/07

4/07

7/07

Gross

24.0%

24.0%

24.2%

24.2%

24.2%

24.2%

Operating

6.0%

5.9%

5.9%

5.9%

5.9%

5.8%

Net

3.5%

3.2%

3.2%

3.2%

3.2%

3.4%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Wal-Mart's initiatives to further expand its pharmacy business with clinics and increase its $4 generic prescription drug selection may be the perfect antidote to lagging foot traffic in its stores.  

Think about it. People on prescription drugs come back to the same place, again and again, for refills on their meds. If that place happens to be located in the middle of a Wal-Mart, it stands to reason that Wal-Mart's drug program will be putting more and more repeat buyers in its aisles. It's the exact opposite effect of the company's ill-considered foray into competing with Netflix (NASDAQ:NFLX) by renting DVDs by mail (which I argued at the time would give shoppers an incentive to stay away from Wal-Mart's stores, and which plan Wal-Mart subsequently abandoned). This time, the brilliant boys from Bentonville have a much better plan.

For more Foolishness:

Its drugs may be cheap at $4, but is Wal-Mart's stock a buy at $43? Take a free 30-day trial of Motley Fool Inside Value and find out what our stock sleuths say about the newsletter recommendation.

Fool contributor Rich Smith does not own shares of any company named above. Netflix and Costco are Stock Advisor picks. Get your free refresher course on The Motley Fool's disclosure policy right here.