According media reports, retail giant
Wal-Mart Stores Inc.
) is struggling hard to destock its inventory and thus cutting
new orders to its suppliers. Reportedly, the company is slashing
product orders for the next two quarters of fiscal 2013. Walmart
however has denied the reports and stated that the company places
orders as per its requirements and is not struggling with its
Investors, on their part, continue to remain skeptical of this
Zacks Rank #4 company as it has been posting declining same-store
sales for the past few months. In the recently concluded second
quarter fiscal 2014, Walmart posted softer-than-expected sales
and missed the Zacks Consensus Estimate by 1.8%. This was on top
of sluggish results announced in the first quarter.
U.S. same-store sales in the second quarter declined 0.3% in
contrast to 2.2% growth in the prior-year quarter and missed the
guidance range of flat to 2% increase. Weak consumer spending
environment and lower-than-expected inflation hurt comps in the
Walmart's inventory jumped 6.9% in the second quarter due to
softer-than-anticipated sales trends, a delayed summer and timing
Walmart also lowered its sales guidance for fiscal 2014,
signaling weak sales in the upcoming quarters. The company
sharply lowered its net sales growth guidance from a range of
5%-6% to a range of 2%-3% due to weaker-than-expected performance
in the first half.
Moreover, Walmart warned of a challenging sales environment in
the second half, which together with currency headwinds could
hurt second half top line growth. The company expects the gloomy
consumer spending environment to continue globally for some more
time. The economic strains in the U.S. and abroad are likely to
pressurize its low-income shoppers for the rest of the year.
Walmart also lowered its earnings expectations from a range of
$5.20 to $5.40 to $5.10 and $5.30 per share. For the third
quarter of fiscal 2014, Walmart expects U.S. comp sales to be
relatively flat, much lower than last year quarter's growth of
We believe that a cautious consumer spending environment might
impact the upcoming holiday season, which helps retailers to
derive majority of their revenues for the year. Walmart is geared
up to turn around its sluggish sales this holiday season and has
unveiled plans to hire 55,000 seasonal employees and give more
hours to thousands of other workers.
Other retailers that are better placed and worth considering
Dollar General Corp
Ross Stores Inc
Etablissements Delhaize Frer
), all of which hold a Zacks Rank #2 (Buy).
DELHAIZE-LE (DEG): Free Stock Analysis Report
DOLLAR GENERAL (DG): Free Stock Analysis
ROSS STORES (ROST): Free Stock Analysis
WAL-MART STORES (WMT): Free Stock Analysis
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