Retail Sales Show Joneses May Be Shopping at Walmart

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Retail sales came out mixed this morning, and frankly the figures were very disappointing considering year over year sale comparisons.  Today was a mixed picture overall for retail stocks and it really highlights whether or not it is time reconsider Walmart Stores Inc. (NYSE: WMT).  If low growth prevails along with a consumer that is very price sensitive, then Walmart should be the winner.  Take a look at Costco Wholesale Corp. (NASDAQ: COST) and Target Corp. (NYSE: TGT) and you might see this.

Costco in its retail report this morning said that its July same-store sales were up 6%.  The good news here is that Thomson Reuters had estimates around 5.5%.  The bad news is that Costco reported that the currency effect and adjusting for gasoline would have generated a gain of 4%.  Costco did not offer up any guidance.

Target Corp. reported that its same-store sales grew by 2%, just shy of the 2.3% expected from Thomson Reuters.  It seems that the addition of more groceries is not countering weak sales in consumer electronics, video games, and in movies and music.  Target expects that the August same-store sales will rise in the mid-single digits.

Walmart no longer reports its same-store sales data on a monthly basis.  That gives a less clear picture considering that the retail giant accounts for such a large portion of the overall retail economy.  The issue to consider is that we are entering in a slower growth phase of the economy.  Some call it a double-dip recession, but that would take a much worse economy than what we are seeing in the numbers.

If everyone is still spending, but spending very cautiously and under extreme price sensitivity, is Walmart’s best case scenario.

Costco shares are down 1.7% at $56.40 and Target is now up 2% at $52.55.

Without going into extreme detail, it does not need to be said that Walmart stock has been range-bound and dead money for the last decade.  The 52-week range is $47.77 to $56.27.  Traditionally, buying Walmart in the high $40’s has been the entry point of choice. The high $40’s was just there in mid-July.

Walmart is down this morning by 0.25% at $51.47.  Maybe Walmart’s stock should be up rather than down.

Because Walmart is a rather low volatility stock, we’ll be looking at options trades later.

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Article printed from InvestorPlace Media, https://investorplace.com/2010/08/retail-sales-show-joneses-may-be-shopping-at-walmart/.

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