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May
24

WMT: And the Blame Game Continues

This was originally posted on 5/16
The Street was braced for a negative same-store sales out of Wal-Mart (WMT), but not quite 1.4% negative. As I discussed in my Tuesday piece, the blame game marched across the press release — weather, payroll tax — but the company threw in another addition: inflation.

Well, specifically, the company cited a lack of inflation. Wal-Mart said it drove ticket prices up only 40 basis points, as opposed to the 110-bps rise last quarter. Looks like the inflation tailwind that helped last year’s comps won’t be reappearing anytime soon. Moreover, with traffic down 180 bps — compared with only 10 bps last quarter — something has got to give.

But before you run from this safe haven of yield, there is a glimmer of good news. Comps have been positive in May so far. The company is guiding to a same-store sales rise of 0% to 2%, which I believe is still a bit optimistic. (Why not stick with flat guide?) Further, if you exclude the first two weeks of the first quarter, comps and foot traffic were actually up. With things looking up for May, maybe we really can blame some of this on the weather?

With that, here are a few read-throughs from Thursday’s conference call.

First, Wal-Mart said sales from entertainment and toys sank in the mid-single digits, and big-ticket electronic sales were particularly weak. I know the Street is in love with Best Buy (BBY) these days, but that is worth noting. Beyond that, tobacco sales were down this quarter. It turns out that those tobacco rollouts at dollar stores — Family Dollar (FDO) and Dollar General (DG) — are actually having an effect.

While revenue from apparel and outdoor-gear was undoubtedly under pressure due to the weather, I am not sure we can throw electronics and tobacco into that blame game.


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