WMT

Wal-Mart’s Free Cash Flow Tumbles; Earnings Outlook Continues to Deteriorate

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On Thursday, Wal-Mart (WMT) issued relatively lackluster third-quarter results. Consolidated net sales advanced 1.6% (2.7% on a constant-currency basis), but comparable store sales fell 0.3% in Walmart US and only nudged 1.1% higher at Sam’s Club (both measures exclude the impact of fuel). Consolidated operating income increased 3.6% thanks to improved performance across the board. Reported third-quarter diluted earnings per share from continuing operations came in at $1.14 per share, a 6.5% jump compared to the measure in the year-ago period. For the nine months ended in October, net cash from operating activities came in at $13.3 billion and capital expenditures were $9.5 billion, resulting in free cash flow of $3.8 billion, or about 1.1% of Wal-Mart’s massive revenue base. … Read more

Jana Bets Big on Outerwall

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Great investors are often a wonderful source of investment ideas and opportunities—imagine capitalizing on a great Buffett idea like Coca-Cola (click ticker for report: ) in the late 1980’s. However, blindly following an elite investor can have disastrous consequences—think following Bill Ackman into J.C. Penney (click ticker for report: ). Valuentum helps you sort out the good ideas from the bad. Still, when an investor with a superb track record takes a sizable stake in a troubled company, we tend to pay attention. Barry Rosenstein’s Jana Partners has trounced the S&P 500 since its inception, achieving annual compounded returns of 12.7% versus 1.7% for the S&P 500 over the same time frame. Jana is known as an activist shareholder that … 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

Wal-Mart’s Weakness Persists in the Second Quarter

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Global retailing powerhouse Wal-Mart (click ticker for report: ) reported soft results for its fiscal year 2014 second quarter Thursday morning. Total sales increased 2.4% year-over-year to $116 billion, slightly below consensus expectations. Earnings-per-share was in-line with consensus estimates, increasing 5.1% year-over-year to $1.24. Year-to-date, Wal-Mart has generated $5.2 billion in free cash flow, equal to 2% of total revenue. Though headline results could have been worse, we were disappointed to see performance in the US remain negative, as same-store sales declined 0.3% year-over-year. Management noted on its second-quarter prepared remarks that traffic improved sequentially and that some softness was due to the firm’s investment in price. Operating margins actually increased 20 basis points year-over-year to 8% of sales, suggesting … 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

Taking a Look at Retail

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The first quarter earnings season for retail has certainly been a bit of a mixed bag. Two of the largest retailers in the US, Wal-Mart (click ticker for report: ) and Target (click ticker for report: ) reported negative same-store sales revealing cautious spending patterns from American consumers. On the other hand, home improvement giant Home Depot (click ticker for report: ) registered wonderful sales gains as the firm continues to ride the housing recovery. Let’s take a look at the results of some retailers leveraged to discretionary income. Urban Outfitters                                                Urban Outfitters (click ticker for report: ) posted a solid first quarter, even though its revenue was slightly lighter than expected. Revenue rose 14% year-over-year to $648 million, driving … Read more

Best Buy’s Comps Are Soft; Risk/Reward Not Compelling

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After shares nearly flirted with $10 in December, electronics retailer Best Buy (click ticker for report: ) has seen its stock more than double thanks to moderating sales declines and a store revamping strategy that displayed great promise. However, Best Buy’s first quarter fell short of consensus expectations as the Street got a bit ahead of itself in gauging the velocity of the turnaround. Revenue declined 10% year-over-year to $9.3 billion, which was well below consensus estimates. Adjusted earnings per share fell 58% compared to the prior year to $0.32 per share, which was a touch better than consensus expectations. Free cash flow swung to negative $179 million for the quarter, reflecting the firm’s inability to earn net income more … Read more

Wal-Mart’s Sales Decline Doesn’t Matter

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Global retailing goliath Wal-Mart (click ticker for report: ) posted lackluster results for its fiscal 2014 first quarter earlier this morning. Total sales increased just 1% year-over-year to $114 billion, below consensus expectations, as US same-store sales dipped 1.4%. Earnings per share increased 5% year-over-year to $1.14, which was a penny below consensus estimates. Free cash flow for the quarter totaled $1.9 billion, lower than that of the prior-year period, which benefitted from a substantial amount of accrued income taxes. Wal-Mart’s management team provided several reasons for the decline in same-store sales, including the delay in the payroll tax, the negative impact of one less selling day and adverse weather. All factors are likely valid for a company as broad … Read more