Walmart: Sales So Far Look Very Encouraging

Wal-Mart (WMT) reported November sales on Thursday and it is continuing to gain momentum. Company same-store-sales rose 1.5%.

Wal-Mart Stores:
Grocery and pharmacy continued to drive strong comparable store sales during the November four-week period. In addition, Wal-Mart had very solid "Black Friday" sales across the store, from entertainment items to sleepwear.

Sam's Club:
In the November four-week period, Sam's Club had strengths in a number of holiday and gift-giving categories, including electronics and video games.

Guidance

The Company expects the comparable store sales of its U.S. operations for the December five-week reporting period to be between one and three percent. Can Wal-Mart just stop giving us guidance? One to three percent, we get it. Let's just save the time and we'll assume it. Just let us know if it will be anything different.

All in all, what is not to like? The international operations continue their growth up to 25% of sales from 24% last year in Q3 despite a soft Mexican environment. Even thought they were not buying as much, more shoppers were coming through the door throughout the country.

More good news:

Target (TGT) said Thursday that their November same-store sales rose 1.1 percent, missing analysts' expectations of a gain of 3 percent and shares fell 4%. The reason? They may actually see an earnings decline in Q4 if earnings in the quarter are not "impressive".

Taget and Wal-Mart have become an "either / or" proposition. You are either going to one or the other. Now that Wal-Mart seems to be getting its act together in the US, Target will face more headwinds. Now, do not get sucked into the % gain for the two companies. 1.5% for the $200 billion Wal-Mart is considerably more dollars than the $46 billion Target. When that volume of dollars is flowing to Wal-Mart rather than Target, it means two things.

1- Wal-Mart means value and that is what shoppers want this year.

2- Wal-Mart's renovated stores and improved electronics and clothing departments (the one here looks great) are bringing in shoppers who last year went to Target.

Thursday's report is very good news for Wal-Mart shareholders. The supertanker that is Wal-Mart has been doing a slow turn since early summer and shows us it might just be coming around. Let's not get too excited though. We need a December confirmation to be sure. However, based on these numbers and the walmart.com results to date, one ought to be very encouraged.

Comments

[cranky investor]

the biggest problem with wmt's 1-2 % same store sales gains is that inflation is running at a higher rate; as such, when one price adjusts their sales, it turns out that they're nor improving at all. Improvement means more than selling the same box of soap this year for 1.02 than was sold last year for 1.00.
the true criteria for retail growth is "same store operating margin; the test whether from one yr to the next a store can maintain its core profitability it is a lot harder to manipulate those numbers since you can easily "buy" sales with lower prices but "buying" margin is a lot tougher

[firboy4]

Yeah, that's right! And the only thing that seemed informative in this article is when it compared WalMart to Target. I shopped at Walmart today, and Target didn't even enter my mind as an alternative, though I do like the atmosphere in Target better. Personally, I wouldn't buy stock in either one of them, having been in retail for 15 years, and know how to increase sales. Increased sales DO NOT mean increased profit. It usually helps, but there's a law of diminishing returns at work, when you reduce the wrong items too much to get those sales.

I think all retailers are scared as hell this year and all are sacrificing profit to get those sales, so that they don't get stuck with inventory.