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Old Man Winter Takes Down Wal-Mart, but That's No Surprise
Wal-Mart reported an earnings miss this morning.
Michael Comeau    

This article was originally posted on the Buzz & Banter, where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

Wal-Mart (NYSE:WMT) is in the news today on account of its weak first-quarter results, which it's blaming on Old Man Winter.

Earnings came in at $1.10 per share, missing by a nickel, while revenues were $114.2 billion -- about 1.2% shy of the $115.6 billion consensus. Wal-Mart said it took a $0.03 EPS hit from the weather, while excluding currency, revenues would have been $115.7 billion.

Throughout Q1 earnings season, knocking companies that blame the weather has turned into a Twitter (NYSE:TWTR) meme, even though in the case of retail, weather can most certainly make people stay home and shop less. Sky-high utility bills aren't helping consumers, either.

In any case, I wouldn't count Wal-Mart's quarter as saying much of anything about the US economy. And it's certainly not a surprise.

Here are some things to keep in mind:

1) Retailers have already been reporting mediocre earnings. According to FactSet, as of May 12, expected Q1 earnings growth for retailers was just 1.7% because of the weather. We won't know much until we get second-quarter numbers, where growth is expected to bounce back to 5.8%.

2) Last year, Wal-Mart's US sales rose just 1.8%. With that in mind, the fact that it's still growing sales at all on such a huge revenue base is remarkable in itself.

3) Competition in online retail is clearly an issue. While Wal-Mart's online sales rose 27%, think about just how big Amazon.com (NASDAQ:AMZN) is getting. In Q1, Amazon had $15.7 billion in net product sales. It grew sales in that segment by $2.4 billion, while Wal-Mart grew its total sales by just $854 million. Plus, Amazon generated significant additional revenues through third-party seller fees, which are growing faster than the core retail business.

Add in eBay (NASDAQ:EBAY) and other smaller online players, and you have a bad recipe for growth for big-box retail.

The bottom line is, the retail sector and Wal-Mart's lower-income consumer base haven't been doing well for a while, so this latest disappointment is nothing new.

Twitter: @MichaelComeau

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
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No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Old Man Winter Takes Down Wal-Mart, but That's No Surprise
Wal-Mart reported an earnings miss this morning.
Michael Comeau    

This article was originally posted on the Buzz & Banter, where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

Wal-Mart (NYSE:WMT) is in the news today on account of its weak first-quarter results, which it's blaming on Old Man Winter.

Earnings came in at $1.10 per share, missing by a nickel, while revenues were $114.2 billion -- about 1.2% shy of the $115.6 billion consensus. Wal-Mart said it took a $0.03 EPS hit from the weather, while excluding currency, revenues would have been $115.7 billion.

Throughout Q1 earnings season, knocking companies that blame the weather has turned into a Twitter (NYSE:TWTR) meme, even though in the case of retail, weather can most certainly make people stay home and shop less. Sky-high utility bills aren't helping consumers, either.

In any case, I wouldn't count Wal-Mart's quarter as saying much of anything about the US economy. And it's certainly not a surprise.

Here are some things to keep in mind:

1) Retailers have already been reporting mediocre earnings. According to FactSet, as of May 12, expected Q1 earnings growth for retailers was just 1.7% because of the weather. We won't know much until we get second-quarter numbers, where growth is expected to bounce back to 5.8%.

2) Last year, Wal-Mart's US sales rose just 1.8%. With that in mind, the fact that it's still growing sales at all on such a huge revenue base is remarkable in itself.

3) Competition in online retail is clearly an issue. While Wal-Mart's online sales rose 27%, think about just how big Amazon.com (NASDAQ:AMZN) is getting. In Q1, Amazon had $15.7 billion in net product sales. It grew sales in that segment by $2.4 billion, while Wal-Mart grew its total sales by just $854 million. Plus, Amazon generated significant additional revenues through third-party seller fees, which are growing faster than the core retail business.

Add in eBay (NASDAQ:EBAY) and other smaller online players, and you have a bad recipe for growth for big-box retail.

The bottom line is, the retail sector and Wal-Mart's lower-income consumer base haven't been doing well for a while, so this latest disappointment is nothing new.

Twitter: @MichaelComeau

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
More From Michael Comeau
Old Man Winter Takes Down Wal-Mart, but That's No Surprise
Wal-Mart reported an earnings miss this morning.
Michael Comeau    

This article was originally posted on the Buzz & Banter, where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

Wal-Mart (NYSE:WMT) is in the news today on account of its weak first-quarter results, which it's blaming on Old Man Winter.

Earnings came in at $1.10 per share, missing by a nickel, while revenues were $114.2 billion -- about 1.2% shy of the $115.6 billion consensus. Wal-Mart said it took a $0.03 EPS hit from the weather, while excluding currency, revenues would have been $115.7 billion.

Throughout Q1 earnings season, knocking companies that blame the weather has turned into a Twitter (NYSE:TWTR) meme, even though in the case of retail, weather can most certainly make people stay home and shop less. Sky-high utility bills aren't helping consumers, either.

In any case, I wouldn't count Wal-Mart's quarter as saying much of anything about the US economy. And it's certainly not a surprise.

Here are some things to keep in mind:

1) Retailers have already been reporting mediocre earnings. According to FactSet, as of May 12, expected Q1 earnings growth for retailers was just 1.7% because of the weather. We won't know much until we get second-quarter numbers, where growth is expected to bounce back to 5.8%.

2) Last year, Wal-Mart's US sales rose just 1.8%. With that in mind, the fact that it's still growing sales at all on such a huge revenue base is remarkable in itself.

3) Competition in online retail is clearly an issue. While Wal-Mart's online sales rose 27%, think about just how big Amazon.com (NASDAQ:AMZN) is getting. In Q1, Amazon had $15.7 billion in net product sales. It grew sales in that segment by $2.4 billion, while Wal-Mart grew its total sales by just $854 million. Plus, Amazon generated significant additional revenues through third-party seller fees, which are growing faster than the core retail business.

Add in eBay (NASDAQ:EBAY) and other smaller online players, and you have a bad recipe for growth for big-box retail.

The bottom line is, the retail sector and Wal-Mart's lower-income consumer base haven't been doing well for a while, so this latest disappointment is nothing new.

Twitter: @MichaelComeau

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
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