Wal-Mart loses its luster
Analysts have turned on the retailing giant, saying sales are likely headed down.
Worried about how the company fared in the crucial holiday shopping season, analysts are starting to cut their ratings. JP Morgan was the latest to sock Wal-Mart with a neutral rating, causing the stock to drop more than 1% in midday trading Monday to $54.88.
"We've become increasingly concerned that the company's recent same-store-sales deterioration in the U.S. could be a secular problem that could last multiple years -- not just a few quarters," wrote JP Morgan analyst Charles Grom in a research note. The stock has been a non-starter for more than a decade, and over the past year mostly stayed in the $48 to $56 range.
Grom added that he didn't think Wal-Mart had a great holiday season, but said the downgrade from overweight to neutral wasn't directly related to the retailer's fourth-quarter performance. We'll find out how the company did when it reports its fourth quarter next week, on Feb. 22.
Post continues after video:
JP Morgan's downgrade follows a similar one last week from UBS Securities. Analysts there cut the stock's rating to neutral from buy, saying same-store sales could have a tough time in the fourth quarter.
Sources tell The New York Post that Wal-Mart is trying to get rid of excess inventory after a disappointing holiday season, and it has halted orders of fresh merchandise.
Oh, how things have changed. Wal-Mart was optimistic back in November, predicting that sales would finally rise -- after six quarters of consecutive declines -- at stores open at least a year, Reuters reported.
But then huge snowstorms and freezing temperatures brought much of the country to a standstill. Gas prices also rose, putting more pressure on household budgets. And Grom at JP Morgan suspects heightened competition from "niche grocers" and dollar stores.
So Wal-Mart's dreams of sales growth were dashed -- at least in the minds of some analysts.
"Everybody is sensitive to the sales number," one Gilford Securities analyst told Reuters. "Whether or not it is caused by the weather, if it comes up short the stock is going to feel a setback."
In other words, Monday's stock drop was just the appetizer. A disappointing earnings report could send shares down further.
Who wants to walk several hundred feet to find a product in Wal-mart when I can go to a neighborhood dollar store and get most household essential things and only walk a few feet compared to walk-a-mart.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] The stock market ended the holiday-shortened week on a mixed note as the Dow Jones Industrial Average shed 0.1%, while the S&P 500 added 0.1% with seven sectors posting gains.
Equity indices faced an uphill climb from the opening bell after disappointing quarterly results from Google (GOOG 536.10, -20.44) and IBM (IBM 190.04, -6.36) weighed on the early sentiment. Google reported earnings $0.15 below the Capital IQ consensus estimate on revenue of $15.42 ... More
More Market News
|There’s a problem getting this information right now. Please try again later.|
VIDEO ON MSN MONEY
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'