Wal-Mart Earnings Preview (WMT)

Wal-Mart Stores Inc. (NYSE:WMT) is set to report earnings before the open on Tuesday morning.  There is a discrepancy on earnings consensus, because the WSJ shows a FactSet consensus at $0.66 EPS and First Call has a consensus of $0.67 EPS.  The difference is from rounding, and we have the First Call revenue estimate at $91.72 Billion for the quarter.  As far as what to expect for Fiscal Jan-2008, we have First Call consensus at $1.02 EPS and $106.6 Billion in revenues. 

Besides the earnings per share, all that really matters at this point is what the company says regarding same store sales for the quarter ahead and its margins.  The main reason for this is that we already know the preliminary sales for the quarter within one or two percentages points, and that was listed as approximately $91 Billion.  Here are the last round of retail sales out of the key comp’s here:

• Target’s October sales and forecast;
• Costco’s October sales and forecast;
• Wal-Mart October sales and forecast.

Some portion of retail has to do well in a slowdown.  After it’s all said and done, people need to eat, they need to wear clothes, they need to buy batteries, and they need to buy household and personal care goods.  The bulls need to hope Wal-Mart doesn’t cut prices too much, at least not more than has already been telegraphed.

Lee Scott has maintained too much of a "more of the same" stance for 24/7 Wall St. to be positive on its strategic outlook, and if you haven’t heard us over and over or if you haven’t seen us on CNBC, Scott needs be shown the door.  We question the plan that Wal-Mart will win in a slower economy because they had their chance to prove that before.  But we at 24/7 Wall St. are willing to accept that we may be wrong.  Wal-Mart needs to slow its cap-ex even more than it forecast at its last meeting.  But enough there.  The funny part is that it looks and feels like the worst is over, but the stock is probably going to see profit taking into any strength.

We are looking at the company’s guidance and we’ll keep our hopes up for a reduced domestic growth plan out of the company.  24/7 Wall St. has Wal-Mart up for review in our "Special Situation Investing Newsletter."  If Lee Scott can’t do the right thing and if the board of directors wants to keep losing money, then we’ll be offering a far more radical solution starting in 2008.

Jon C. Ogg
November 12, 2007