This Friday is a big day for Wal-Mart investors. The world's largest retailer holds its annual stockholders' meeting in Arkansas in the morning and follows in the afternoon with a three-hour analysts' session. Both will be webcast at www.walmart.com, so if there are any surprises, they'll be live and echo worldwide.
A couple of days before the gatherings, Wal-Mart (symbol WMT) announced that May sales would be at the low end of the expected range. That, plus the market's general tumble, dragged the share price down to $48 on Tuesday. The company attributed the disappointing sales to Mother's Day coming too early this year for workers who got paid on May 15 and, once again, to the high cost of gasoline. Yet April sales were strong, and Wal-Mart shares spent most of May climbing from $45 to $50, so the energy excuse is debatable. Besides, affluent shoppers who are more annoyed than harmed by $50 fill-ups could deem it worthwhile to save a few bucks on this and that at Wal-Mart rather than pay more at a standard supermarket. And that no longer means slumming. Newer Wal-Mart Supercenters, which sell groceries, are at least as spiffy as many a Safeway or a Kroger supermarket.
Given that fuel isn't going to get cheaper, you might as well stop reading now if your opinion of Wal-Mart starts and stops at the gas pump -- you'll probably never buy this stock. That would be shortsighted. True, the shares are about where they were in 1999. But Wal-Mart remains a great company, and its stock is as cheap as it's ever been. The company sports a high return on equity (23%, compared with 18% ten years ago) and a historically modest price-earnings ratio of 16 (based on estimated earnings of $2.94 per share for the year ending next January).
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Moreover, Wal-Mart hasn't saturated the American landscape as much as you might think it has. There are 215 Wal-Marts (including Sam's Club stores) in Florida and 194 in California. But there are more than 400 in Texas. And there are still plenty of global opportunities. China, for instance, contains just 56 Wal-Mart stores.
Maybe nothing much will emerge from Friday's sessions. But if there is news, odds are that it's more likely to be favorable than harmful.
--Jeffrey Kosnett
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