Walmart (WMT) stock. Paul Blart, cop. You might think that the only connection between these two sentence fragments is the fact that they rhyme with one another … you’d be dead wrong.
They also happen to be metaphors for one another. One is a bumbling, large, inept mall cop who, on his poorly manned scooter, nerdily putters around the mall on a thankless beat in a hapless existence. But somebody’s gotta do it.
That’s Paul Blart.
So where does WMT come in? In owning Walmart stock, investors own a piece of a bumbling, large, inept retailer, who, with its brick-and-mortar focus, merely exists rather than thrives during the days of the e-commerce renaissance.
Like Blart, Walmart chose its path long ago and is pot committed to seeing it through. Walmart can’t exactly decide to stop supplying its physical stores and paying its staff. It exists by necessity.
Hopefully, something positive and surprising will happen when the mega-retailer reports earnings before the bell on Thursday. Walmart stock, down 23% in the past year, sure could use a jolt.
Walmart Stock: Sad Holiday Season by the Numbers
Retailers usually live for the holiday period. For almost all of them, it’s the best three-month quarter of the year, as Americans kick into full consumer mode and serenade one another with presents. Walmart is no exception.
The only trouble is, analysts expect Walmart stock to produce fewer earnings per share than it did a year ago. Specifically, Wall Street thinks Walmart will post EPS of $1.43, an 11% slip from the $1.61 per share it earned in Q4 2014. If that happens, it’ll be the sixth straight quarter of lower year-over-year EPS for Walmart.
Analysts expect that trend to continue for at least the next four quarters. WMT is transitioning into an era of lower profitability, boosting workers’ pay in a long overdue effort to improve customer experience and employee morale.
That might be more tolerable for WMT stock owners if revenue was projected to tick higher, but it’s not. Revenue is expected to fall 0.6% year-over-year to $130.76 billion.
As with the Paul Blart franchise — whose greatest punchline came when someone actually greenlighted a sequel — you have to search far and wide to find a silver lining.
If we’re being charitable, we can acknowledge the WMT dividend, which yields 3% annually and is far better than the 10-year T Bond, which yields less than 1.8%. And we can say to ourselves: “Walmart stock will thrive in a souring economy, as every man, woman and child turns to their local superstore for canned food and Ramen.”
Thankfully, however, our economy really isn’t in such dire shape. Unemployment remains at multiyear lows and the U.S. continues to grow despite plunging oil prices. It’s the rest of the world that’s having so much trouble with growth — another unfortunate fact of life for WMT stock. Walmart has heavy exposure to soft international markets, which also bring with them foreign exchange headwinds.
Wall Street analysts recognize how unattractive Walmart stock is, giving it a consensus target of $64.22, less than Tuesday’s closing price. Not to be outdone, Paul Blart: Mall Cop received a 33% (out of 100%) on Rotten Tomatoes, while its sequel, the creatively titled Paul Blart: Mall Cop 2 earned a 5%.
With so much else in retail to choose from — Amazon (AMZN), Target (TGT), Costco (COST) and Alibaba (BABA) to name a few — Walmart is officially the Paul Blart of retail.
As of this writing, John Divine was long AMZN stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
