Wal-Mart released sales today and at first blush, it was not all that good, until you dig just a bit more.
First the results:
Wal-Mart said “Unfavorable weather negatively affected overall general merchandise sales, especially in the Midwest. Gift card redemptions were below expectations, and customers appear to be holding gift cards longer and using them more often for food and consumables rather than discretionary purchases.”
They continued ” We expect to be within our previously stated guidance of $0.99 to $1.03 for earnings per share from continuing operations for the fourth quarter of fiscal year 2008.”
On CNBC this morning Jim Cramer dismissed the “weather” reasoning because of the results at both Costco (COST) and BJ’s (BJ). Here is the problem with that. If it indeed was the weather in the Midwest as Wal-Mart stated, it would not effect BJ’s at all as they have no locations there and Costco has less than 10% of theirs there. BJ’s said “By region, the largest sales increases were in Upstate New York and Metro New York” where the weather was mild in January.
Now even Costco’s results were not that stellar as the headlines would lead you to believe. In their release they said “The U.S. comparable sales figure includes, among other things, the effect of gasoline price inflation, with the average sales price per gallon of gasoline up 31% for the four-week month of January, as compared to the year-earlier January. Excluding gasoline price inflation, U.S. comparable sales would have been up 3%.” Wal-Mart numbers are reported “excluding fuel”.
At BJ’s, “For January 2007, the Company reported a comparable club sales increase of 3.5%, including a contribution from sales of gasoline of 0.3%.
If we are doing an honest comp., we need look at Sam’s Club, which reported 2.1% comparable growth without gas as has far more exposure to the Midwest that the others.
Looking at Target (TGT), they said today “On this same equal-week basis, January comparable store sales decreased 1.1 percent”.
Now, does this mean Wal-Mart is in trouble or we should just ignore these results? No, it does mean that we should not draw too many conclusions from this month. The weather in the Midwest was lousy and the two retailers Wal-Mart is being compared to have no real exposure there, making the comparison flawed.
Disclosure (“none” means no position):Long Wal-Mart, None
