SWY

10 Bucks per Hour; What It Really Means

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Source: US Department of Labor, Walmart Walmart (WMT) is quite savvy. The big box retailer announced February 19 it would raise the minimum wage for all of its US workers to $9 per hour in April of this year and at least $10 per hour by next February. The move comes amid ongoing public scrutiny of its labor practices, elevated worker turnover, and general malaise among the ranks on social media platforms. At face value, the news headlines show Walmart caving to public pressure, and a win for big labor, but in reality, the retailing giant is merely doing what good businesses do – pleasing customers (which are its workers, too) and widening its economic moat. Hiking wages accomplishes both. … Read more

Valuentum Economic Castleâ„¢ Rating Update

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Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more

Dividend Increases for the Week Ending May 16

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Below we provide a list of firms that raised their dividends during the week ending May 16. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week ACE Limited (ACE): now $0.65 per share quarterly dividend, was $0.63. Albany International (AIN): now $0.16 per share quarterly dividend, was $0.15. American Express (AXP): now $0.26 per share quarterly dividend, was $0.23. Anadarko Petroleum (APC): now $0.27 per share quarterly dividend, was $0.18. Arctic Cat (ACAT): now $0.125 per share quarterly dividend, was $0.10. Clorox (CLX): now $0.74 per share quarterly dividend, was $0.71. Gentex … Read more

Surveying the Retail Landscape: Dollar General, Kroger, and Costco

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On Thursday, Dollar General (DG), Kroger (KR) and Costco (COST) reported quarterly results. Dollar General’s third-quarter report showed same-store sales advancing 4.4%, which propelled total sales 10.5% higher during its third quarter (ending November 1). Kroger’s third-quarter report showed 3.5% identical supermarket sales growth, without fuel, during the period ending November 9, while Costco’s fiscal first-quarter results (ending December 1) revealed same-store sales expansion of 3% during the quarter. Dollar General’s quarterly performance not only bested that of Kroger and Costco, but it also stood head-and-shoulders above that of Wal-Mart (WMT), which reported a comparable store sales decline in Walmart US and only a 1.1% increase at Sam’s club, and Target’s (TGT) third-quarter performance, where US comparable store sales advanced only … Read more

Surveying 3Q Performance Across the Retail Spectrum

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Sears There’s not much to say about Sears’ (SHLD) operational performance during its third quarter (results issued Thursday), except that it was atrocious. The firm lost more money in the most recently-reported quarter ($534 million) than it did through the first nine months of last fiscal year ($441 million). CEO Eddie Lampert has his hands full with the company’s multi-year transformation, but we think investors are hanging on to shares largely on hopes the firm will be able to monetize its real-estate portfolio in the future. Image Source: Sears But it seems that (lately) too many investors have been buying into this line of thinking, and the ‘real estate’ thesis continues to proliferate among investor psyches, particularly (now) with J.C. … Read more

Safeway Misses But Will Sell Unprofitable Chicago Business

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Thursday afternoon, grocery retailer Safeway (click ticker for report: ) posted lackluster third quarter results that were overshadowed by the firm’s decision to sell its unprofitable Chicago-area Dominick’s stores. Revenue increased just 1.1% year-over-year to $8.6 billion during the period, a touch better than consensus estimates. Operating earnings per share, net of Dominick’s, were $0.10, down 38% year-over-year and well short of consensus expectations. Still, free cash flow has nearly doubled year-to-date to $382 million, equal to 1.5% of total revenue. Goodbye Chicago Perhaps the most encouraging news from the third quarter came from the announcement that Safeway will exit its Chicagoland Dominick’s business by early 2014. The firm bought Dominick’s for $1.2 billion in 1998, but the acquisition hasn’t … Read more

Kroger: The Model for Competing with Wal-Mart and Target?

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Thursday morning, grocery giant Kroger (click ticker for report: ) reported strong second quarter results, proving it is possible for a traditional retailer to do battle with Wal-Mart (click ticker for report: ) and Target (click ticker for report: ). Revenue increased 4.6% year-over-year to $22.7 billion, modestly exceeding consensus estimates. Earnings per share jumped 18% year-over-year to $0.60, a penny above consensus expectations. Free cash flow year-to-date was solid at $1.5 billion, equal to 2.9% of revenue. Source: Company Filings As one can see from the chart shown above, Kroger has dramatically outperformed Safeway (click ticker for report: ) during the past two years as competition from the likes of Wal-Mart, Target, and Meijer has intensified. Kroger’s same-store sales … Read more

Whole Foods Remains the Best Grocer

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Last week, organic grocery store chain Whole Foods (click ticker for report: ) reported wonderful third quarter results, again outperforming its peers. Revenue surged 12% year-over-year to $3.1 billion, in-line with consensus estimates. Earnings per share rose 20% year-over-year to $0.38, also in-line with consensus expectations. Free cash flow totaled $115 million, equal to 4% of sales. How Did Whole Foods’ Peers Do? The grocery business certainly is not a bull market. Competitor SuperValu (click ticker for report: ) reported weak results for its fiscal year 2014 first quarter. Revenue from continuing operations declined 1.5% year-over-year to $5.2 billion, as retail food same-store sales declined 3% year-over-year while Save-A-Lot same-store sales declined 1.5% year-over-year. Continuing operations also posted a loss … Read more

Amazon’s Expansion Knows No Bounds

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On Tuesday, we received a variety of information about Amazon’s (click ticker for report: ) expansion into different product lines. The company is looking to expand its AmazonFresh same-day grocery delivery service and could enter as many as 40 markets this year. Additionally, the firm entered into the highest streaming content contract ever, purchasing the rights to stream over 4,000 episodes of Viacom (click ticker for report: ) TV shows. Let’s dig into the details. AmazonFresh For years, people have speculated that the end-game for Amazon was to build so many warehouses that it could effectively offer same-day shipping on any product and compete with brick-and-mortar shops on the basis of time. Thus, the expansion of AmazonFresh comes as little … Read more

Roundy’s: A Cheap Stock in a Terrible Industry

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After going public in early 2012, we profiled Midwestern grocery chain Roundy’s (click ticker for report: ). Earnings momentum has moved materially against the company, and as we predicted, the firm had to slash its enormous dividend payout. In a typical post-IPO period, management was optimistic about future prospects, and competition in the firm’s core Wisconsin market looked weak at best. What CEO Bob Mariano didn’t see coming was that Wal-Mart (click ticker for report: ) would enter Wisconsin in a big way, Woodman’s would keep growing, and Roundy’s-owned Copps would be thrown into a major price war, crushing same-store sales and margins. Our initial thesis included a stable, or even slightly declining core business, but not the 3.6% decline … Read more