Wal-Mart loses its luster

Analysts have turned on the retailing giant, saying sales are likely headed down.

By Kim Peterson Feb 14, 2011 2:25PM
Credit: (©Mel Evans/AP)
Caption: Wal-Mart StoreWall Street is losing its faith in Wal-Mart (WMT).

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.

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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.






7Comments
Feb 14, 2011 9:29PM
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I don't like WalMart, much.  I feel sorry for the folks who work there.  Anyway, if I did want to help WalMart  I would have them take a look at their customer's experience per trip to the store.  They screwed themselves when they tried to become Target, and they miss opportunities to be BETTER than Targe't.  For instance,  when the country gets old and fat (which has already happened) and your store is as big as a mall, put some damn benches around the store so Grandma can sit down a spell or junior can rest those barking dogs!  If WalMart only knew how many sales it misses because people don't want to tackle the BIG BOX.  They also need to find a way to treat employees better, their strained smiles and taxed demeanor's are so depressing to encounter.  Would it kill management to let cashiers have a stool to lean/sit on for maybe the second half of their shift?  WalMart will never out-feminine Target, so they shouldn't try! They may be able to out-family the competition though, if they weren't so obviously  heartless. Where's the loss leader Soda machine at the front of the store? GONE  Where's the smile on the little one's faces as they realize their coins will buy them a drink AND a treat? GONE  Where's America's allegiance to the store that used to promise low prices ALWAYS, AND had enthusiastic employees that profited from investing in their employer GONE The sad thing is, not only do I know I'm right, I know there's not a chance in Hades  that  WalMart will wake up and smell the coffee, they're too big to pay attention anymore, they'd rather just concentrate on paying minimum wage (plus a quarter) and trying to squeeze a quarter more out of  YOU for your next pound of coffee.
Feb 14, 2011 10:48PM
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I always found Walmart and enjoyable shopping experience. Right up to the point of reaching the 20 person lines at the 4 open registers. I won't even go into a Walmart anymore.
Feb 15, 2011 12:32AM
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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.Smile

Feb 14, 2011 5:43PM
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Wall mart fall a part. This miserable company deserevs to go under
Feb 15, 2011 2:19AM
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In my area, ever since they replaced the old store with a new supercenter, it's been all downhill. I actually liked the smaller store better because there was a WIDER selection of merchandise in every catagory, other than grocery.  Like all retailers, they've cut back on selection and have eliminated products altogether. I patronized their arts & crafts department frequently while in the old store. Imagine my surprise and disappointment upon seeing the much smaller version in the supercenter.  Now, I go to Jo-Ann Fabrics.
Feb 15, 2011 11:03AM
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I've been getting my prescriptions at Wal-Mart for a couple years now and as an old geezer, I use several Rx's on a daily basis.

I've become increasingly tired of being treated like livestock at their "pharmacies," but my encounter two days ago convinced me that it's time to buy prescriptions elsewhere.

Not only are their staff members arrogant, they have no problem showing their customers how little they value their customers' time, or schedules. I believe any cost savings Wal-Mart MAY provide just aren't worth the aggravation. Experiences like this show me exactly how essential competition is in improving customer satisfaction. Pharmacies other than Wal-Mart's do exist and I'll be using them for filling my next Rx.   
Feb 15, 2011 12:54PM
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Cannot stand the place and as long as i have options i will never shop there.
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