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Patrick McKeever, MKM Partners managing director and senior equity analyst for Discount Retail, on why investors should limit their exposure to Wal-Ma...
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-- -- -- appreciate it.
All right so is it time to sell out of Wal-Mart shares Patrick McCain are in -- partners -- -- -- the retail equity analyst joins us now.
Patrick did you put out a note was at this morning saying look these these headlines -- you should the -- reduce exposure to Wal-Mart because if.
I did I did I mean it's moderately above my I have a neutral rating on the stock had a sixty dollar fair value -- -- at the stock.
Closed on Friday at 62 and a half so.
I did say it's too and take a little profits here reduce exposure the stock has under performed the broader market and the rest of retail year to date quite a bit it was up going into this morning it was up about 45% year to date.
But it's had a nice run since last September and I do think that it's you know this is -- a good reason to take some.
Profits you know Patrick may have 2100 Wal-Mart stores in Mexico if you look at the growth -- you have over the last few years.
This is a company that has grown and seeing strong revenues based on wall -- the subsidiaries and one of their biggest.
Bonuses frankly to the number since 20052006.
In -- -- supposedly broke.
In your opinion do you think that this is actually gonna hurt revenues over the let next year to two years -- this company.
Yeah I mean at this juncture Cheryl as long as it doesn't get much worse and -- and and there's a possibility I suppose that it could.
Get to the point where you do see some changes at the very top of the company I can't really rule that out.
But if it doesn't get that far no I don't see any major fundamental implications at this juncture in time -- consumers do tend to vote.
With their pocketbooks.
Wal-Mart to Mexico has been a real shining star.
In the company's international portfolio.
It's about 20% of their international sales but it's been growing really nicely and it is.
One of the markets it's one of the operations the international operations that management tends to point out.
The most frequently when it when it comes to calling out good performance.
So just -- -- a scale Patrick so their alleged Wal-Mart is still paid 25 million dollars in bribes over a number of years to get started Mexico.
450 billion dollars almost annual sales -- -- over 4% today is an over is that an over reaction.
Well yet I mean it it.
The numbers there that are -- that the bribery allegations figures are tiny vs the company's total sales no question about it but.
It's more the implications and -- in what it means for the company.
The company's credibility management's credibility the company's reputation.
And I think investors are asking themselves whether or not there will be some further -- there'll be some legal charges that actually do come out of this and I think that.
It is possible.
Can't rule it out.
All right Brooklyn before I let you down -- -- you get a reevaluate your rating on the stock Patrick.
I don't I mean.
Yet not really I don't think so -- again I'm -- -- I've got a sixty dollar fair value estimate.
I think that you know that's a pro I think that the stock has been trading at a discount valuation to the rest rest of the the discount earners.
That it's frequently compared to and other retailers that it's compared to and I think that's.
And that's a reasonable.
Way to look at valuation right now I think it should not traded of this debt at a discount so a discount valuation so I don't keeper at camp right now then we'll see what happens -- -- -- -- actually got some breaking.
