When you think of successful retail stores there is one name that always comes to mind: Wal-Mart Stores, Inc. (NYSE:WMT). Wal-Mart started off small at first, when it launched back in 1962. Since then Wal-Mart has seen many customers shop at its store for competitive prices not seen at other retail stores. Wal-Mart had reported total sales for the fiscal year that ended in January of $466 billion. This was a good growth rate, as total sales for the year grew by 5%.
Mixed earnings
Wal-Mart Stores, Inc. (NYSE:WMT) has a market cap of $258.5 billion, and has about 4,033 stores in the United States. The company had some decent earnings, and beat its year over year estimates. Wal-Mart reported an EPS of $1.14 per share on revenue of $114.2 billion. The prior year Wal-Mart had only earned an EPS of $1.09 per share on revenue of $113 billion.
Despite the company showing decent earnings, the company guided down for the 2nd quarter. Wal-Mart Stores, Inc. (NYSE:WMT)only expects to earn EPS between $1.22 – $1.27 per share. This fell short of analyst expectations, as they expected the company to earn $1.29 per share. A lot of the downward guidance is due to Wal-Mart having a slowdown in international sales.
As a long term investor the stock has been acting well, and has continued to gap up from a 52 week low of $62.14. Short term will be a struggle as the company is having trouble with same store sales. Same store sales for the 1st quarter in the U.S. fell by 1.2%, but the plus side is that the online sales grew by 30% year over year. A lot of expanding internationally will mean a lot of costs for Wal-Mart, and the CEO has stated that the company will find different ways to cut expenses.
Possible Competitors
There are a few competitors who can possibly compete with Wal-Mart Stores, Inc. (NYSE:WMT). Two such competitors are Target Corporation (NYSE:TGT), and Macy’s, Inc. (NYSE:M). They are each also struggling like Wal-Mart, but could end up growing bigger in the future. Investors should always look at competitors of a company they are investing in to see how well competitors are doing in relation to the rest of the sector.
Target seems like a suitable competitor to Wal-Mart, because it has the same type of brick and mortar type stores with excellent prices. However, we have to consider what advantages Target has over its competitors. One may not think that innovation is important for retail stores, but Target is attempting to do something different to prove that point.
Target Corporation (NYSE:TGT) has started something known as “The Shops At Target,” which will collaborate with five unique boutiques across the country. The goal is to attract various types of consumers that are after different styles of clothing. Ideas like this will help a retailer differentiate itself from competitors, and produce growth for its shareholders.
Despite Target Corporation (NYSE:TGT)’s new initiatives, earnings left much to be desired. The company reported earnings of $0.77 per share, compared to analyst expecting $.87 per share, which was a big miss. Revenue came in low as well at $16.6 billion, versus expectations of $16.82 billion. The company still believes it has future growth, and believes it will have a turnaround in the coming quarters. One thing that will help long term investors is the fact that Target Corporation (NYSE:TGT) expects to open 125 stores in Canada. These store openings will provide huge amounts of future growth.
Another competitor to Wal-Mart Stores, Inc. (NYSE:WMT) is Macy’s, Inc. (NYSE:M). Macy’s was a little more wiser than its competitors because it adapted the Wal-Mart strategy in pricing. Macy’s decided that it too will add everyday low prices, so that it may improve its revenue growth. Thus far it has worked, and Macy’s, Inc. (NYSE:M) has made a huge turnaround the last 15 months since it started its new initiatives.
Macy’s, Inc. (NYSE:M) earnings for the first quarter came in at $0.55 per share on revenue of $6.38 billion, versus analysts expectations of $0.53 per share on revenue of $6.4 billion. The company seems to have slightly come below revenue, and the company stated this was because cool spring weather shifted into April. This cool weather, as the company claims, brought down their revenue for the quarter.
Final Thought
Wal-Mart has continued to climb higher as the stock market has risen. There is no doubt that the company still faces many economic challenges. This company is in the best position to handle the current economy because of its lower prices compared to other competitors. Long term investors should seek to add Wal-Mart Stores, Inc. (NYSE:WMT) into their portfolios. The company still has growth in the United States, but most importantly it is expanding internationally as well. One key takeaway is that investors should also compare the retail stock they own, and how it fares compared to all other competitors.
Terry Chrisomalis has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
The article Wal-Mart Is Reaching New Heights originally appeared on Fool.com.
Terry is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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