Ahead of the Tape: Wal-Mart Left Out of Postvote Stock Party -- WSJ
November 17 2016 - 03:03AM
Dow Jones News
By Steven Russolillo
Someone threw a postelection party and forgot to invite Wal-Mart
Stores Inc.
As the major stock indexes rallied sharply after Donald Trump's
surprise victory, retail and supermarket stocks were among the
biggest winners. Whole Foods Inc., Supervalu Inc. and Kroger Co.
all jumped. Macy's Inc. and Kohl's Corp. notched double-digit
percentage gains. Target Corp. on Wednesday had its biggest one-day
increase in two years after boosting its holiday outlook.
Wal-Mart has been conspicuously absent.
The world's largest retailer has underperformed the Dow Jones
Industrial Average since the election. And while an upbeat earnings
report Thursday could help close the gap, any further upside seems
limited. Analysts polled by FactSet forecast estimate third-quarter
earnings of 96 cents a share, down from $1.03 a year earlier.
Revenue for the period is expected to log an uptick of just 1% to
$118.6 billion.
Mr. Trump has advocated for lower taxes, less regulation and
more fiscal spending, which in theory should juice the economy and
has helped stoke the broad market rally. But Wal-Mart is known for
beating the market during tough times. It was one of the few blue
chips that rose in 2008 thanks to its defensive characteristics.
Today, American consumers are loosening their purse strings. U.S.
retail sales have had their best two-month performance in at least
two years, according to government data released this week.
Furthermore, potential friction with Mexico and a tumble in that
country's currency may hurt. Wal-Mart has 2,373 stores in Mexico,
roughly 20% of its locations.
Meanwhile, Wal-Mart's bottom line has been pressured by heavy
spending on higher wages, store improvements and building out its
e-commerce operations. It acquired Jet.com earlier this year for
$3.3 billion, the largest purchase ever of an e-commerce
startup.
And in October, Wal-Mart offered a muted earnings outlook for
its next fiscal year, saying it expects earnings to be flat from
the prior year. It expects to slow new store openings as it focuses
more on digital.
Even after missing out on the postelection rally, Wal-Mart
shares are still up about 17% for the year, more than double the
Dow and S&P 500. Fetching 16 times projected earnings, the
stock isn't much of a bargain.
Whether other retailers have much to celebrate is an open
question, it isn't Wal-Mart's type of crowd anyway.
(END) Dow Jones Newswires
November 17, 2016 02:48 ET (07:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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