Is Wal-Mart Getting Roll-Back Pricing on Taxes?

Ads featuring Wal-Mart (WMT) are all over the television recent days. Normally, that would be a good thing for the discount retailer. In this case, however, Wal-Mart is being used in a Barack Obama political ad. The ads claim that John McCain is giving millions of dollars in tax cuts to Wal-Mart "and millions more to its CEO." Seeking to play off the resentment many small communities and small business owners feel when a Wal-Mart store opens up in their towns, the Obama campaign is using the company as a surrogate for the evils of big business and the politicians that pay more attention to the rich than the everyday citizen.

And why not? According to a study released on Monday by Brand Finance, Wal-Mart is the new world's top brand. Other brands in the top five are Coke (KO), Microsoft (MSFT), IBM (IBM), and Google (GOOG). Wal-Mart climbed from third position in last year's survey to displace Coke for the number one slot. David Haigh, CEO of Brand Finance, said that although a number of variables go into selecting the top brands, the rankings are largely "driven by projections of future sales and profits."

Wal-Mart's sales have been strong. Unlike other large retailers that we've reported on in recent weeks, Wal-Mart is not having trouble maintaining year on year sales numbers. In fact, the discounter's most recent earnings report showed very healthy growth. International sales grew by 17% for the company. US sales were broken down into the company's two main divisions: Wal-Mart stores which saw 5.8% growth and Sam's Club stores which had 6.7% growth. Wal-Mart has become known for low prices and it is exactly this reputation that helps them garner business during times of economic stress. Meanwhile, Wal-Mart now accounts for nearly one-fifth of supermarket sales in the US.

In total, Wal-Mart posted a 14.7% earnings growth against the same period last year. Wal-Mart stock currently stands at $59.70 per share. The price is just a few dollars off its 52 week high and is helped by the company's ambitious, ongoing $15 billion stock repurchase plan. Since Wal-Mart typically does well during times of economic hardship, it should continue to post strong results going forward. Wal-Mart has pioneered the lean supply chain and has a reputation for continually pounding its suppliers for lower costs, so profitability should stay strong as well.

While many investors are flocking toward quality in the current economic situation, it can be expected that many of them will wind up at Wal-Mart. While its current stock price isn't quite as low as its retail prices, it isn't over-priced at this level given its sales outlook for the coming year.

Stock position: None.

Comments

[TLinDC:]

These ads were actually run by Wake Up Wal-Mart (wakeupwalmart.com), not the Obama campaign...just thought you'd want to know.

2008 Sep 23 11:22 AM

[Thunder:]

I think this ad was run by WakeupWalmart.com, too, and I think it's really impressive. I think this is legitimate policy issue -- some people think that the world's largest retailer should have some basic environmental standards, should treat its employees decently and should be restrained from steamrolling local economies. And then some people -- like McCain -- think all of those things fine and dandy.

2008 Sep 23 05:50 PM

[SteerCleer:]

someone has to tell the truth.......wakeupwalm... has done more for WM associates than WM ever will... I should know I ounce was one .... when our very own President can brag on how much he made off WM stocks ... to the tune of $29 Million dollars last year... from all you folks that think WM is the only place to shop ....you get what you pay for NOTHING.....makes one wonder
where and why WalMart as all those loopholes to fall though......

2008 Sep 23 11:24 PM