Can Wal-Mart Improve Same Store Sales?

REPLAY VIDEO
Your next video will start in
Pause

Recommended Videos

  • Info

  • Comments

  • VIDEO TEXT

Aug. 14 (Bloomberg) -- S&P Capital IQ's Ian Gordon and Option Pit Mentoring's Mark Sebastian preview retail sales with Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Americans are opening up their wallets again.

Retail sales rose in july.

But the story isn't just about the numbers here.

It's about earnings.

And there are a sure a lot of them coming up.

Macy's, kohl's, nordstroms, sachs just to name a few.

The mother of all retailers on whether it's on course.

Talking about walmart.

Net sales have climbed since 2009. that success doesn't come without a few mishaps along the way.

Among them, the mexican bribery scandal and empty shelves.

Will the largest retailer reaffirm faith in the u.s. consumer or cause investor panic?

Deirdre bolton with the story.

Ian gordon with the strategy.

What are folks looking for tomorrow.

When i spoke to analysts about what they're waiting for from walmart, two key metrics.

Waiting for same store sales looking for a range between 0% and 2%. a lot of people saying if it comes in as 0, the market will have a neutral reaction.

But if there's a negative read that will put a lot of pressure on the stock.

Not too much people will come in higher anyway than .5%. canada, also, the expansion in canada seems to be a big theme.

A lot of analysts waiting for more data on that.

Of course, you know walmart is going to compete directly with target there.

If you look at the stock charts year to date, target outperforming walmart.

Some of the elements that are working for walmart, they're offering electronics.

The ones apparently people want to buy.

Apple's ipad, iphone, apparel, home goods.

These are all goods gaining traction.

Traction.

Some pressure, some duress.

There's a lagging employment from many people.

A lot of these things can affect walmart's earnings and how much money people are willing to sell there now.

Walmart is being really impressive with the pricing.

The comparison between walmart, this choice of at least where people say they're going to do the back-to-school shopping.

It remains to be seen if that's where they're going to go.

People say they are, in fact, going to go back to walmart.

Basket of goods for back to school, $155.20, k-mart for comparison, $272.70. what does this mean for the margin.

A little bit of the setup.

Three metrics.

Same store sales, expansion in canada.

How they're competing and a little spin forward to back to school.

Talk about the prices.

I know you have a hold in gordon.

Are you nervous and where do you think the stock is headed.

Not particularly.

We're expecting $1.25 in earnings for the quarter.

That's in line with the capital iq consensus.

That's a 6% year-over-year growth.

A 0.3% same store sales growth in the u.s. a little towards the low end of that 0 to 2% range.

That's in line with the differential in the government retail sales growth numbers that we saw from the first quarter to the second quarter, about two percentage points better than the first quarter.

That's where we should come out.

Our target price is $81. a 90% total return, including the dividend.

That's about what you would expect from the market.

Where's the pressure coming from?

Do you think consumers are struggling because jobs are still hard to come biy?

Weather issues that walmart might have to contend with.

Where are the pressure point s? they're all over the place.

The 2% payroll tax is still weighing on the consumer, particularly the core walmart consumer which is at the lower end of that spectrum and the 2% is really the difference between them having chicken or steak for dinner or vegetables.

Gas prices are inching up.

The job growth slowed down a little bit in the second quarter.

Wages as well.

Not seeing much movement on that front.

Where does it leave you, mark, in the options pits in chicago.

What are you thinking?

Walmart is like a straight a student.

When they show up with an a-minus or b plus, they get punished and with an a, they don't get a lot of reward.

Looking at paper flow, a lot of bearish action and at the money puts, slightly in the money puts that tends to be really pointing towards some negative bias.

The trade i like is a risk-reward trade.

Expiring tomorrow, 76-74 put spread paying about 50 cents.

So i'm getting three-to-one payout against my risk and that's a trade that has 50-50 odds of working.

If i can get 50-50 odds of something that pays me three-to-one, i take it any day of the

This text has been automatically generated. It may not be 100% accurate.

Advertisement

BTV Channel Finder

Channel_finder_loader

ZIP is required for U.S. locations

Bloomberg Television in   change