Walmart Misses While Target Hits

Written by GSCR Staff   
Friday, 16 November 2012 11:48

Friday, November 16, 2012

Yesterday was an interesting day in the discount retail world.  With Black Friday one week away we thought this story from was worth a look.  Walmart (NYSE – WMT) missed on earnings and lowered guidance for the fourth quarter and was hammered, as the stock went from $71.30 to $68.72.

Meanwhile, Target (NYSE – TGT) announced increased sales from third quarter 2011 and increased guidance for the fourth quarter in 2012.  The stock went from $61.09 to $62.04.  The company has done an effective job in increasing customers with adding more grocery stores and getting more repeat customers with loyalty programs.

Walmart has a lot of problems that are worth a look.  First and foremost, the economy in the US.  Lower-income families are among the worst hit by the great recession and still are not spending.  Second, the company faces a bevy of external problems like probes in India, strikes in the US, and a lot of unrealized capital expenditures in overseas expansion in countries like Japan.

Has Walmart lost its way with expansion overseas?  The business model that worked for decades was large stores in predominately rural and suburban areas in the US.  Is this another American ‘institution’ that forgot what made it great in the first place.  Time will tell, with the fourth quarter holiday sales and earnings becoming crucial for the company.

Aaron Schweitzer

Goldman Small Cap Research

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