Published Oct 15
Wal-Mart (WMT) kicks off its analyst day this morning and may reveal quarter-to-date comps. My guess is similar to last year: Management will not let the cat out of the bag. After all, it is a safe assumption that store traffic continues to be negative, and offering up another comp data point distracts from the work that goes into management presentations focused on long-term strategy.
The good news is that expectations are low, particularly after J.C. Penney (JCP), Gap(GPS) and Family Dollar’s (FDO) recent results were less than inspiring. Wolverine(WWW) chimed in Tuesday as well, calling out the “tepid environment for soft goods.” The bottom line is if Wal-Mart has a negative sign in front of the comp when it reports earnings in mid-November, I don’t think anyone will be surprised.
So what will Wal-Mart serve up on analyst day? The low-end consumer remains under significant pressure with a reduction in SNAP benefits, underemployment and dismal wage growth. Throw protein food inflation into the mix and we expect WMT to focus on continued cost-cutting in order to plow savings back into pricing.
In addition, we expect to hear more about ecommerce progress, as WMT is trying to make up for a late start (progress could also mean more spending).
Finally, we expect the company to share progress on smaller-format stores — the key will be how well those new-format comps hold up.
Oh, and don’t forget the most important piece of the puzzle. Where will WMT go after pricing this holiday season? Note to the competition: Watch out for falling prices and falling margins.