I am sure Wal-Mart (WMT) will get a bump today from its February results, although I am not sure why folks are so surprised.
The Results:
Wal-Mart posted a 2.6% increase in U.S. same-store sales, topping their own projection last month of flat to 2% growth. Wal-Mart’s stores had a 2.5% increase while Sam’s Club had a 2.8% gain. Total company sales were up 8.9% with the International division posting a 18.9% gain. Sales strength continued in key categories including food, flat-panel TVs, digital audio, video games and the pharmacy. Even better news was the 8% dividend increase to 95 cents a share for a current yield of 2%, which, for a retailer is very good.
Said Eduardo Castro-Wright, Wal-Mart Stores U.S. president and chief executive officer, “The comp sales results in our three largest businesses continued to outperform the market.”
For March, Wal-Mart projects flat to 2% growth. Now, we should ignore this projection because it has been the same for about 8 months now.
The common perception of the results is that people are “trading down” to Wal-Mart as times get tough. That does make a certain amount of sense until you notice 32 inch flat panel TV’s were one of the top sellers. When you then add in the digital audio and video games, one has to think that customers are finding better value for the same items at Wal-Mart compared to Target (TGT) and Best Buy (BBY). This isn’t a case of “trading down” but finding value. We are not talking about trading down from Gucci to Fruit of the Loom, but finding a good price for comparable products.
One also has to think the refurbs that have been done are making a difference, adding a freshness to the customer experience. It would be very hard to convince me the emphasis on electronics in the refurbed stores have no relation to the impressive results there.
The weather was also cited in January’s vanilla results and with better weather in February, and the improved results, that reasoning is now starting to hold some truth. March (at least in the northeast) has had a very mild start and the outlook for the near future remains so. That being said, we can expect a positive impact there for the month.
The longer we get into Wal-Mart turnaround and as we witness results and outlooks from both Best Buy and Target, it is beginning to look more and more every day like it is those shoppers now going to Wal-Mart.
Disclosure (“none” means no position):Long Wal-Mart, None
