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Wal-Mart (WMT)
Why Did Wal-Mart's Same-Store Sales Drop Unexpectedly?
Without a doubt, as the world's largest retailer, Wal-Mart's performance tends to be carefully analyzed and scrutinized. And until recently, it looked like Wal-Mart was going to unquestionably withstand the recession significantly better than many of its competitors. As Wal-Mart reported its second quarter earnings this morning, however, a few things became clear. The company has remained profitable, even slightly beating analysts' estimates, and increasing very gradually from the year before. However, a few key figures slipped unexpectedly, and this has caused some individuals to question whether Wal-Mart is actually as stable as they had believed.
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The good news was that second quarter earnings increased from 87 to 88 cents per share, which beat analyst estimates of 85 cents per share. The first piece of disappointing news was that revenue actually fell, dropping 1.4% to $100.08 billion, below estimates of $102.9 billion. More concerning, however, was the unexpected news that same-store sales fell 1.2%. Wal-Mart hadn't experienced a drop in same-store sales in over a year, and although the company stopped reporting this statistic on a monthly basis in May of this year, analysts were still predicting an increase for this quarter.
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The decline in same-store sales has partially been attributed to the current exchange rates. But another important factor, which seems to have been quickly forgotten, is the fact that a year ago, Wal-Mart and other companies received a significant boost from the government-issued stimulus checks. Wal-Mart provided incentives to encourage people to cash their check at Wal-Mart, and then encouraged them to spend their money at the store, leading to significant increases in sales. Keeping this context in mind, it's a little more understandable that same-store sales wouldn't be as high this quarter. Although investors have been a little cautious in regards to Wal-Mart this year, sending shares down approximately 11% this year so far, this earnings report seems to have been satisfactory, as investors have been pushing Wal-Mart shares upwards since the announcement. Although there were some temporary concerns, Wal-Mart appears to have proven itself once again, and is hoping that its continued actions will turn the rest of the doubts into relief.
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Wal-Mart Words of Wisdom:
Six Reasons Wal-Mart Could Beat Estimates - Why was this individual so confident that Wal-Mart would beat estimates? Partly due to the simple fact that in these economic times, people just want to save money, and Wal-Mart is drawing consumers with its low prices.
Wal-Mart's Backward Business Revolution - Learn about the new book being released, "The Retail Revolution: How Wal-Mart Created a Brave New World of Business." The book looks at the history of the company, and how it rose to be so successful.
Wal-Mart Threatens Amazon: Is It Safe? - An interesting piece that debates the future of online retailers such as Amazon (AMZN: Charts, News, Offers), compared to retail stores such as Wal-Mart and Target (TGT: Charts, News, Offers).
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More Stocks in the News:
Microsoft, Nokia, and Google Take Aim at RIM -The smartphone battle rages on, as companies such as Microsoft (MSFT: Charts, News, Offers) introduce new technologies to compete against current market leaders.
GM's Volt Offers Amazing Mileage, But At What Cost? - General Motors (GM: Charts, News, Offers) is making headlines with the new Chevy Volt, but a closer look at the numbers reveals some questions about the car's value.
Ridiculously Cheap Travel Deals - JetBlue (JBLU: Charts, News, Offers) announced an unprecedented promotion yesterday, allowing customers access to unlimited travel for a month for only $599. Will this deal help JetBlue's profits to soar, or is it not as great a deal as it sounds?
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