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Is Wal-Mart in Sluggish Growth Mode?

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  • Description

    Patrick McKeever of MKM Partners weighs in on Wal-Mart's growth plan.

  • Duration 4:01
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Well we thank you very much and Fox News Channel.

Well Wal-Mart profit at five point 7% in the second quarter and the stock is up 25%.

In just the last three months but now -- is concerned.

If growth to continue through back to school and the holidays Patrick -- managing director and senior analysts.

-- the stock -- -- joins me now are right how do you feel after the call after looking at the numbers are you gonna stay with initially gonna need to build themselves.

Rating on the stock in the Patrick.

Well -- I'm neutral I've got a neutral rating on the stock.

-- I mean there was a little bit of deceleration in the second quarter.

Wasn't a bad quarter they -- positively for the third fourth quarter in a row traffic was positive at Wal-Mart US which is the core business.

But that the overall same store sales number.

Was a little bit below where -- was in the first quarter they had a two and a half percent increase on a consolidated basis in the second quarter that's vs a 3% increase.

In the first quarter and the comparisons become a little bit more difficult in the back half of the year management continues to talk about a very pro announced paycheck cycle which.

Indicates suggests that their core customers are our shopping when they get their paychecks and and the business slows down toward the end of the month that sort of thing so.

I think we'll see probably a little bit more deceleration.

In the back half of the year end and that's a concern with the stock having done as well it -- as it has done in not in recent months.

-- -- of those a couple of concerns there because you know the last four quarters they have shown domestic growth.

But as you mentioned international -- was the number -- got everybody kind of excited here's the problem -- got this issue down in Mexico you got to congressional committees that are going after them.

Threatening to issue a very negative scathing report congressman Cummings going after -- you've got to DOJ and SEC investigation mean what does that do a lot of confidence your confidence that Wal-Mart.

Sure sure well I -- it hasn't really done much to the stock because the stock is up 20/20 5%.

Since that story broke back in April initially it took a big big drop this down more than 5% on the day that that story broke in the New York Times.

But it's rallied since that time so.

The market the investment community seems to be saying it's a non issue.

And we can move beyond that and it's a little bit of a concern for me there certainly is some headline risks there's this ongoing internal investigation that wal mart's doing.

We don't know what will come of that.

But again that the market seems to be saying it's a non issue.

They had a -- -- decent increase in same store sales in Mexico in the quarter.

I think it was 3%.

So it doesn't seem to be having a big impact on consumer spending on on traffic or business in Mexico and it certainly hasn't had much of an impact and.

US and obviously an -- growth -- -- -- -- -- another you're gonna be watching me online numbers this -- Wal-Mart dot com and Sam's Club has been doing decently before -- though I do wanna ask you about the competition that is target.

Target has been opening up these urban centers these target expresses Wal-Mart really hasn't been doing that that kind try to really hasn't work.

Is it's gonna take a bite at a Wal-Mart.

Target just opened three in in their second quarter of these city target stores which are in downtown areas that got one in Seattle one in Los Angeles and one in Chicago so.

The numbers are very very small it's it's very early days their target is planning on opening two more of those.

In the current quarter.

Wal mart's small store strategy revolves more around its neighborhood market which is more of a grocery store and then these Wal-Mart express stores.

And they are too I mean the numbers are growing nicely from a relatively small base but the core business is really Wal-Mart.

The super -- business and and so now that I'm in the short answer is I don't see a big impact yeah Citi target on on wal mart's smaller store agenda.

Ads aren't as many issues at those large stores as well which were a big difference now why assurances -- Pet indicator -- -- camp Patrick thank you get heavy on the show again.

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