Wal-Mart (WMT) Slides After Frantic Executive E-Mails and Meeting Minutes Released
Shares of superstore Wal-Mart (WMT: Charts, News) slid last week, after leaked internal e-mails revealed the worst sales start to a month in seven years, attributed to the January payroll tax that reduced discretionary spending.
Wal-Mart's vice president of finance and logistics Jerry Murray was blunt, stating in an e-mail obtained by Bloomberg, "In case you haven't seen a sales report these days, February MTD sales are a total disaster." If that wasn't gloomy enough, he added, "(This was) the worst start to a month I have seen in my seven years with the company." Daily Chart
Although Wal-Mart hasn't officially released its February sales numbers yet, the leaked e-mail was enough to cause the stock to drop last Friday. Wal-Mart's spokesman David Tovar released an official response to the leaked communications, stating, "As with any organization, we often see internal communications that are not entirely accurate, that lack the proper context and represent individual opinions." However, Murray's comments were only one of many leaked internal documents obtained by Bloomberg and circulated amongst financial websites. Clearly, there is dissent in the higher ranks at Wal-Mart who are looking to spread some pessimism about the company's future. According to the minutes of a February 1 meeting obtained by Bloomberg, Wal-Mart had originally expected a strong start to 2013, thanks to the Super Bowl, mild weather and paycheck cycles. But weak sales in January, which Senior Vice President of U.S. Replenishment Cameron Geiger stated that he was relieved to see end, poured cold water on those hopes. "Have you ever had one of those weeks where your best prepared plans weren't good enough to accomplish everything you set out to do?" Geiger asked in an internal e-mail to executives. "Well, we just had one of those weeks here at Walmart U.S. Where are all the customers? And where's their money?" Both Murray and Geiger blamed increased payroll taxes and delayed tax returns as the primary causes of the February slowdown. Geiger dramatically called the combination a "potent one-two punch" in an e-mail. At the start of last February, $19.7 billion in tax refunds had already been delivered to shoppers. This year, however, refunds are delayed, due to the late release of tax forms and additional tax-fraud scrutiny regulations. A payroll-tax break expired on December 31, which forced Americans to pay 2 percentage points more on their Social Security taxes on their first $113,700 in wages. Wal-Mart analysts state that the increased payroll tax is equivalent to a year of car insurance payments for a family living on $30,000 annually, or a bag of groceries per month for a family earnings $50,000. Wal-Mart believes that major macro challenges will keep up pressure in the coming year. In the fourth quarter, the U.S. economy contracted by 0.1%. Meanwhile, unemployment rose 0.1 percentage point to 7.9% in January. Lastly, consumer confidence slid to its lowest level since November 2011. Shares of Wal-Mart trade at 12.9 times forward earnings with a 5-year PEG ratio of 1.55. The stock pays a quarterly dividend of 40 cents per share - a 2.29% yield at current prices. The company officially releases earnings on Thursday, February 21. Other News About WMT Wal-Mart Executive, In Internal Email, Notes Slow Start to February Sales
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Published on Feb 19, 2013
By Leo Sun