What's the matter with Wal-Mart?
Bribery investigations and lackluster sales dog the world's largest retailer.
Shares of Wal-Mart (WMT) tumbled in early trading after the world's largest retailer reported lackluster sales, disclosed that investigations into alleged bribery overseas have expanded and gave uninspiring guidance. To add insult to injury, rival Target (TGT) reported better-than-expected earnings.
Net income at the Bentonville, Ark. company rose 8.7% to $3.64 billion, or $1.08 per share, versus $3.34 billion, or 97 cents per share, a year earlier. Revenue rose 3.4% to $113.9 billion. Same-store sales, a key retail metric measuring activity at stores opened at least a year, rose 1.5%. Wall Street expected Wal-Mart to earn $1.07 per share on revenue of $114.95 billion. Analysts also expected Wal-Mart to post same-store sales growth of 2%, according to Bloomberg.
Wal-Mart came under fire earlier this year after the New York Times reported that the company ignored evidence of widespread bribery at its operations in Mexico. The U.S. Department of Justice and the Securities and Exchange Commission are investigating whether Wal-Mart's actions in Mexico violated the Foreign Corrupt Practice Act (FCPA). Wal-Mart has spent $99 million on its response to the allegations and defending itself against related lawsuits.
The company also disclosed Thursday that it had launched internal probes into possible FCPA violations in China, Brazil and India. Companies do these sorts of internal probes because the federal government might go easier on them in future legal proceedings if they find evidence of wrongdoing themselves.
Looking ahead, Wal-Mart said it expects fourth quarter earnings to be between $1.53 a share and $1.58 a share, a penny lower than Wall Street expectations. The company expects full-year results in the range of $4.88 per share to $4.93 per share, versus earlier forecasts of $4.83 per share to $4.93 per share. Wall Street expectations were for profit of $4.94 per share.
Wal-Mart's argument that its earnings performance is reflective of the overall economy doesn't hold water given how well Target is doing. The smaller rival handily beat Wall Street's expectations, Reuters reported, and is probably expanding its market share ahead of the important holiday season.
One reason why Target is succeeding and Wal-Mart is floundering has to be store design. Shopping at Target is a pleasant experience because its stores are well-lit with merchandise that is easy to find. Wal-Mart stores, at least the ones I have seen, tend to be dingy and the layouts tend to be confusing. My family and I have been loyal Target shoppers for years, and we rarely venture into Wal-Mart, even though there is a location that isn't far from us.
Though Wal-Mart's prices are undoubtedly low, that strategy has its limits. People who shop solely based on costs are probably the least loyal consumers around. If Wal-Mart ever hopes to emerge from its slump, it will need to offer consumers something more. Exactly what that may be is tough to say.
Investors should stay clear of Wal-Mart stock for the time being. Besides, Target is a much better value. The Minnesota company currently trades at a price-to-earnings ratio of 14.05, well under its five-year high of 17.04, according to Reuters. The average 52-week price target on Target is $70, more than 13% above where it currently trades.
Jonathan Berr is long Target. Follow him on Twitter@jdberr
one other thing that's wrong with Walmart, entitlement at any cost. read this article.
"College removes name of Wal-Mart heiress on arena" dtd 11/24/2004
Walmart is a very dangerous place to shop i had a very bad experience with walmart andhose G I JOE AND G I JANE they hire to protect you they come when everything is over and those managers they hide when trouble happens........i guess what they are getting paid for is not oh risking their life because they have an unruly customer but i have to applaud the young lady that took the wle thing from an unruly and very angry customer she stood up to him and yea G I JOE came after it was over ;;;;;;;;;;;;;.........dont shop walmart no more after that .......walmart SUCKS
want another opinion? their stores have body odor.
walmart has gotten to be ajoke when shopping. The stores never care the same products, you find something that you like buy it and go back a week later and it is never there. Keeping the store stocked is a problem..Why doesn't the American buying public just quit going to walmart. Everything they sell comes from China or some other country. They should demand American products..I can remember when Walmart was proud to carry American made products. You saw the American flag all over the store.
Between Wal-Mart's employee pay scale and benefits package, many of its employees, especially those with small children, are eligible for food stamps, WIC, Section 8 Housing vouchers and Medicaid. America's taxpayers are paying Wal-Mart's operating expenses! Our laws let them do this and our congress lets this bs continue!
The bounty is being shared by Wal-Mart's stockholders, senior management and various Chinese manufacturers. Don't think so? Here: and
For more, just Google "Wal-Mart employee salaries" and "Wal-Mart benefits" (no quotes).
I WILL TELL YOU. They pay minimum wage to desperate people who in turn have terrible attitudes because they are broke. Their employees have bad service because they are hurting financially and they treat customers poorly.
They make crap that is manufactured in others countries ... they ship jobs away bad bleed our country dry...
That’s what is wrong
Greed. Ceo's and Board member's ridiculous high pay, People that run the stores can't figure out that they need to restock merchandise and food and have brains enough to know when they sell out items fast they need to order more of that item. Customer service is totally gone! Why should we pay for Chinese junk and make these that care for their own pocket book. Gosh if they made less than they did (ceo's) where would they pay for them lap dances?
MORE ON MSN MONEY
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. 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 SIX Financial Information.
The market's cheap money addiction is laid bare. No one knows how it will end.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.