The last thing a rocky retail sector needs is more bad news from Wal-Mart Stores, Inc. (WMT) earnings on Nov. 17, but there’s a high probability that’s what WMT will deliver.
After all, WMT largely kicked off the current climate of fear for retail-sector stocks after issuing a stark earnings warning last month.
True, much of that was due to company-specific problems, but the wider consumer spending picture is doing it no favors either.
Macy’s (M) and Nordstrom (JWN) shocked investors with disappointing earnings ahead of the all-important holiday selling season. JC Penney (JCP) spooked the market when it failed to raise its same-store sales forecast for the current quarter after beating expectations in the three-month period that just closed.
Even worse, monthly U.S. retail sales came in soft vs. estimates and were revised lower for the prior month as well.
This is not a good backdrop of economic and earnings news for WMT to deliver earnings. It has enough problems of its own.
Walmart’s core customers generally have fewer discretionary dollars to begin with, and that’s been a drag on results ever since the last recession. Globally, WMT is getting hammered by the effects of the strong dollar. Lastly, costs are piling up as the discount retailer increases wages for employees and investment in online operations.
Walmart stock was already having a bad year before it told investors that profits would drop by as much as 12% in 2016. Since then, it has been look out below for Walmart stock.
Shares are off 34% for the year to date. The S&P 500 is essentially flat over the same period, while main rival Target (TGT) has shed a much more modest 4.8%.
WMT Earnings Will Get No Quarter
It’s not like Walmart earnings are going to be so great to begin with. Analysts, on average, expect WMT earnings to comes to 98 cents a share, down from a year-ago profit of $1.15, according to a survey by Thomson Reuters. Revenue is projected to slip 1% to $117.8 billion.
It’s possible that expectations for Walmart earnings are low enough heading into the report to beat Wall Street estimates, but you can’t bet on it.
Walmart earnings have missed Street estimates for two consecutive quarters. Revenue has missed projections in two of the last four quarters.
Of course, any guidance the retailer gives about the holiday-season outlook is going to be the real star of the earnings show. With so much of the retail sector spooking investors this reporting season, WMT sure isn’t going to get the benefit of any doubt if it has more warning to do.
WMT stock had plenty of problems before a strong dollar, disappointing consumer spending and higher costs started eroded earnings and clubbing the stock.
The way the rest of retail earnings are going this earnings season, investors in Walmart should at least be braced for more bad news.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
