The Wal-Mart (WMT) earnings calls are usually non-events because there is no Q&A and they do not break-our detailed results for international operation. Here is some good news and some disappointing news.
– Consolidated gross margin was up 32 basis points for the second quarter, due primarily to the improvements Wal-Mart U.S. made in inventory management and merchandising flow. Inventory is one of five financial metrics that support efforts to improve free cash flow. The goal is for inventory to increase at half of the rate of our sales growth. Consolidated inventories were up 3.5% against a year-to-date sales increase of 10.4%, a good performance again driven primarily by Wal-Mart U.S.
– Return on investment from continuing operations for the trailing 12 months ended July 31, 2008 is 19.3%
– Capex, was approximately $5 billion for the first half of fiscal 2009, down from approximately $7 billion in the same period last year. As was said in mid June, they are forecasting capital spending for fiscal 2009 to be between $13 and $14 billion. This is down from our original projection of $13.5 to $15.2 billion for the total year.
– Repurchased approximately $845 million of stock, which represented approximately 14.7 million shares. Under the current $15 billion share repurchase facility, they have spent approximately $8.7 billion.
The share repurchase news is particularly disappointing after the record free cash flow results. As a shareholder, if Wal-Mart is decreasing capex, has no plans to significantly raised the dividend, then, why are they sitting on excess cash? One would think that they would expect share price appreciation over the next year and if that is so then buying more shares back now would seem to be the prudent thing to do.
They still have $6 billion under the current authorization and waiting to return that money to shareholders until later in this year or next year will be done with increasingly less impact than if it had been done last quarter.
That does somewhat sully what would have been a sterling report..
Disclosure (“none” means no position):Lomh WMT
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2 replies on “Wal-Mart Earnings Call”
Wal-Mart may look good short-term, but that’s all. The stock has finally recovered to its value 5 years ago (with very little yield while you waited). It’s still shy if its highs set 10 years ago. Now’s the time to get out – while people are recession-dazed and price-oriented. Sell now before things recover and they go back to Target – and before other low-price companies, such as Aldi’s, that are nipping at Wal-Mart’s heels eat in to margins at Wal-Mart. Read more at http://www.ThePhoenixPrinciple.com
adam
disagree…wmt 5 years ago was a chump play at 50 times earnings…
it is fairly valued now based on growth. the price ought to ride performance..