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Rob Zenilman submits: In today's Wall Street Journal, Kris Hudson reports that Wal-Mart's (WMT) 2.7% increase in August same store sales (stores open at least one year) hit the high end of its 1%-3% forecast. Even though it was aggressively marketing back-to school goods, the sales increase is lower than the 3.1% increase realized in August 2005.

Wal-Mart's main competitor Target (TGT) is forecasting an same store sales increase for August of 2%-4%. For the retail sector overall, analysts are expecting gains of 3.3%-3.4%.

Wal-Mart is now focusing on preparing for the upcoming holiday season. Over 1,000 stores will be remodeled, and its advertising will emphasize "lifestyle", as opposed to the historic emphasis on low prices.

Comments:

  • Stronger retail sector sale gains continue to be mostly at the higher end, but there is starting to be some pressure there as will.
  • It will be interesting to see customer reaction to Wal-Mart's new advertising campaign plays with their core clientele. Is Wal-Mart copying from Target's playbook, or are they trying to deal with the impact of increased costs (merchandise, labor & fuel)?
  • While there is still long term value in Wal-Mart, Wal-Mart's next test is holiday sales. According to Rob Black, back-to-school performance has historically been an accurate harbinger for holiday sales.

See: Second Quarter earnings conference call transcript.

Source: Wal-Mart Hits High End of Forecast - Is That Good Enough?