Bets Against Walmart’s Holiday Prospects Continue

By Douglas A. McIntyre Updated Jan 11, 1:58PM EST · Published Dec 8, 8:25AM EST

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Bets Against Walmart’s Holiday Prospects Continue — © courtesy of Wal-Mart Stores Inc.

Some of the sell-off in Walmart Inc.’s (NYSE: WMT) shares can be blamed on the recent market collapse. Ultimately, however, the primary reason to bet against the value of the world’s largest retailer is based on anticipated holiday results. While most economists believe the holiday retail season will be good, Walmart’s ongoing reliance on traditional retail outlets will continue to drag on its prospects.

Walmart’s shares are down 5.3% this year to $93.19. Ten of the 30 Dow Jones industrials are down more than Walmart. The other two large retailers in the Dow are Home Depot Inc. (NYSE: HD), which is off 8.8% to $172.79 a share for the year, and Walgreens Boots Alliance Inc. (NYSE: WBA), which is up 11.8% to $81.19.

Shares of Walmart rival Target Corp. (NYSE: TGT) are close to flat for the year at $67.81. Costco Wholesale Corp. (NASDAQ: COST), a widely regarded smaller competitor, has seen its stock rise 19.4% this year to $224.86.

For at least a decade, Walmart has been measured against e-commerce giant Amazon.com Inc. (NASDAQ: AMZN). Amazon’s shares are up 34.7% this year to $1,629.13.

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Walmart’s growth continues to be very modest. In the most recently reported quarter, revenue rose to $124.9 billion from $123.2 billion in the same quarter the year before. Net income was $1.7 billion, roughly flat year over year. As the company looks ahead, management expects U.S. same-store sales to grow at least 3%. While the number is encouraging based on the recent past, it is still too modest to make the company’s traditional retail channel a reason to think Walmart has cut loose from the gravity of the sector’s problems.

As for e-commerce, Walmart’s says it is growing rapidly. However, it still does not count for more than a few percentage points of Walmart’s overall revenue.

Walmart’s near-term prospects are okay, but many investors don’t think that is close to adequate.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.