Wal-Mart (NYSE: WMT) shares are up nearly 4% today on news that the chain is scaling back its yearly square footage growth and playing a large share buyback program. From the Wall Street Journal:
The world’s largest retailer had been under pressure on Wall Street to slow its U.S. store expansion and use the savings to prop up its flagging stock price. The move will cut capital expenditures this year by $1.5 billion, to $15.5 billion, leaving the total about flat with last year. Thomas Schoewe, Wal-Mart’s chief financial officer, told investors at its annual meeting here that the company would repurchase up to $15 billion in shares through an undefined period. It will fund the buybacks with new borrowings with savings from the fewer store openings.
Wal-Mart Scales Back Expansion,Approves $15 Billion Stock Buyback [Wall Street Journal]
Wal-Mart has aggregated the best excuses for slowing profit growth from around the Street and is expected to present them in an earnings statement tomorrow at a fabulous discount price. Taking a cue from pure retail and bemoaning the unseasonably cold April, and a cue from manufacturing, airline and nearly every other industry in shifting the earnings conversation to rising gas prices, Wal-Mart is boldly foregoing the simple, “we just couldn’t grow that fast anymore” line for another conference call. From Bloomberg:
A 7.3 percent sales increase would be the smallest since the three months that ended January 2003. Wal-Mart on May 10 reported a 3.5 percent decline in April sales at its older stores, its worst monthly performance in at least 28 years. The retailer’s profit growth would be the slowest since the second quarter of 2006, when the company posted a 26 percent drop after exiting Germany. Sales at 53 U.S. retail chains fell a combined 2.4 percent in April, the International Council of Shopping Centers said last week. That was the biggest drop since the New York-based trade group started keeping records in 1970. The retailer will find meeting its first-quarter profit forecast of 68 cents to 71 cents a share “a challenge” because of the “tough sales environment” in April, Chief Financial Officer Tom Schoewe said in a statement on April 12.
Another problem for Wal-Mart is poor people (first they want health insurance, now they won’t shop at our store!), or at least the relative lower income demographic ($40k/year on average, opposed to the millionaires that shop at Target) that tends to curb spending more in the face of rising gas prices (or at least you can pay an economist to draw a few graphs trying to explain as much). Wal-Mart is still experiencing robust growth abroad, with sales of UK and Mexico branches expected to grow close to 19% from last year. One-third of the chain’s sales and profit growth now comes from international locations.
Wal-Mart Profit Growth Probably Slowed on Weather, Gasoline [Bloomberg]
Wal-Mart, whose shares have been relatively flattish and whose Q4 was just so-so, probably due to a little thing we like to call karma, is going with a new approach—taking the advice of Jim Cramer. Back in November, JC penned (what felt like) a 6,000 word article for New York on how much Wal-Mart sucks and what it can do it not suck. Basically, the advice was to become Target, who Jimmy apparently harbors an unrequited love for.*
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Last week we managed to simultaneously insult Wal-Mart and its fans (and the entire borough of Queens) while linking to an article by a libertarian economist defending the shopping giant against an attack in a recent issue of Harper’s Now it only seems fair to give the original Harper’s article a link too. Then we’re going to take a long walk around DealBreaker HQ and wonder when we started caring about things like fairness.
The Case for Breaking Up Wal-Mart [Harper's on Alternet]
We can’t say for sure when the last time we ever actually stepped inside a Wal-Mart was. There’s one coming to Queens in 2008 but we can’t say for sure when the last time we actually went to Queens was, either. So that’s not much help.
So maybe that’s why we don’t get why so many pointy-headed types seem to loathe Wal-Mart. Which is too bad, because according to Thomas DiLorenzo, Wal-Mart’s enemies are “running out of reasons to hate Wal-Mart.”
That’s one bandwagon that totally passed us by.
Should Wal-Mart Be Broken Up? [Mises.Org]
They should get some sort of medal for finding the creepiest, lamest ever way to use the internet to appeal to kids. If this works we’re never trusting anyone under 18 again.
Desperate to appeal to teens with something other than pencils and backpacks during the crucial back-to-school season, Wal-Mart is launching a highly sanitized, controlled and rather unhip site at walmart.com/schoolyourway. Teens are invited to create their own page, “show it to the world and win some fab prizes,” including a chance to have their videos appear in a Wal-Mart TV commercial. Wal-Mart’s agency is GSD&M, Austin, Texas.
The opening page shows video of four teens — a bubbly fashionista, a Texas football player, a quirky skateboarder and an aspiring R&B singer from New York — who are clearly actors reading a script, although the videos are positioned to appear authentic. Within, there are pages such as “Beth’s Backyard Club,” where you find a picture of her in a strapless prom dress above the approved quote: “I’ll school my way by looking hot in my Wal-Mart clothes to school to catch a cute boy’s eye. …”
Wal-Mart Tries to Be MySpace. Seriously [Ad Age]
The Hub [WalMart.Com]