Tags: Wal-Mart | WMT | retailers | stocks

Wal-Mart a Beacon in Stormy Times

By Dan Weil   |   Thursday, 18 Aug 2011 12:07 PM

With the U.S. economy unable to generate sustained growth, it’s a good time to consider Wal-Mart (WMT) stock. The world’s biggest retailer outperforms in troubled economic times because of its low store prices.
During the period that began with the collapse of Lehman Brothers in September 2008 through the stock market’s nadir in March 2009, the Standard & Poor’s 500 Index plunged 44 percent. Wal-Mart shares fell less than half that amount — 21 percent — during the same period.

Clearly Wal-Mart represents a strong defensive stock. It also offers an attractive dividend yield, nearly 3 percent. The dividend has more than doubled over the past five years.

The company registered profit of $3.8 billion in its fiscal second quarter ended July 31, up 5.7 percent from $3.6 billion a year earlier, exceeding analysts’ forecasts. Revenue gained 5.4 percent to $109.4 billion.

After falling for eight straight quarters, Wal-Mart’s same-store U.S. sales were unchanged, excluding fuel. Overseas, Wal-Mart stores net sales jumped 16 percent to $30.1 billion, while Sam’s Club sales climbed 9.5 percent to $13.6 billion.

The strong results stemmed from Wal-Mart’s return to a wide array of goods at rock-bottom prices. The gains led the company to raise its profit estimates for the fiscal year ending Jan. 31.

Struggling consumers

Cash-strapped consumers buoy the company for now. "They're trading down to stretch their budgets — buying a lower-priced brand of detergent, moving from branded canned goods to private label and purchasing half gallons of milk instead of gallons," Wal-Mart CEO Mike Duke said.

Analysts reacted positively to recent earnings. Of 29 tallied by Thomson/First Call, 10 rate the stock a strong buy and five a buy.

Wal-Mart currently garners about one fourth of its revenue abroad, and with the U.S. market largely saturated, it’s looking to expand that international presence. The company is mulling an offer for the Brazilian stores of France’s Carrefour, the world’s second biggest retailer. The company next reports around Nov. 16.

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With the U.S. economy unable to generate sustained growth, it s a good time to consider Wal-Mart (WMT) stock. The world s biggest retailer outperforms in troubled economic times because of its low store prices. During the period that began with the collapse of Lehman...
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