Bracing For Wal-Mart Earnings

Wal-Mart Stores Inc. (WMT-NYSE) reports earnings Tuesday morning, but the truth is that the company already tempered expectations with last week’s sales numbers.  First Call expectations put the results at $0.68 EPS and $87.08 billion in revenues.  It also said its $0.68 to $0.71 EPS range would be difficult to hit.  Translation: Wall Street is already bracing for a lower number, and if not it should be.

Last week’s -3.5% decline in same-store-sales was worse than the -1.1% drop expected and not even that was enough to really hit the stock.  It is just hard to imagine the company making any great big bold projections, particularly in light of the fact that the company gave same-store-sales guidance of up 1% to up 2% for the month of May and for the entire second quarter.  Wall Street is looking for results in Q2 (July-07) of roughly $0.79 EPS on revenues of roughly $93 Billion.  It is hard to imagine anyone demanding more than this based on its own forward sales expectations.

Calling for new leadership other than Lee Scott is something that at some point gets old regardless of the reason and regardless of the history.  Nothing can be blamed solely on one person, but leadership and policies trickle down through the ranks and at this point a fresh leader with fresh initiatives (or even fresh sounding) would be a welcome sight by investors.  We are at a cycle where public opinion and the image of leadership create premiums and discounts to companies.  That implies that the company is at a discount because of a poor perception, and that is a large of why its shareholders are not feeling much love.  Wal-Mart will always have the masses to answer to as long as it has such a large presence and it is likely that some critics would never be pleased, but at some point the obvious answer comes to light: a new leader with a fresh face and a new message can be re-energizing. 
Wal-Mart’s shareholder meeting is in June and these issues over newer fresh goals and ‘maybe’ new leadership may take on more steam ahead of that.  As long as the company doesn’t make any drastic changes tomorrow, the near-term news is probably already priced in the stock.  The company isn’t alone in what was just a slower retail report and certainly isn’t alone in what are going to be tough 2007 to 2006 comparable store sales.  It feels like the street is almost ready to accept what may only be "less bad news."  We’ll know Tuesday morning.

Jon C. Ogg
May 14, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.