Fin - Breakout - US

Retail Analyst Brian Sozzi: Sell Wal-Mart

Jeff Macke

If you want to know whether or not the emperor is wearing clothes, ask Brian Sozzi.

He's the Wall Street Strategies Inc. retail analyst who wasn't afraid to call Wal-Mart a sell in December, and he sees no reason to change his view now.

Why should that matter? For one thing, Sozzi is virtually alone in his negative view. Despite Wal-Mart being dead money for a decade (the stock's up 3.5% since 2001), Sozzi's one of the few to make the rather obvious point that the stock isn't a Table Pounding Buy, a Long-Term Buy or even a Hold. Wal-Mart is a sell -- a stock to be sold to provide funds for better equities.

Another, more important reason to listen to Sozzi is that he's been right. He's been bearish on retail, and retail has been horrid. For 2011 to date, the S&P is up 5%, while Wal-Mart has lost another 3%-plus.

We pay attention to things such as accuracy at "Breakout," so we turned to Sozzi for his take on Wal-Mart as the Bentonville Behemoth faces the largest class-action lawsuit in American history. In a country founded by lawyers, being the defendant of the largest suit in history seems like a bad thing. Sozzi agrees.

"Is it a distraction on the stock in terms of investors? I think it is to a certain extent because we don't know how this will play out," he says. "If they in fact lose this case it will be a significant charge to earnings."

That, in turn, would likely mean the retailer would pull back on its international expansion, as well as on dividend increases and stock buybacks, he says.

Even when the case is in the rear view mirror, Sozzi says the company is simply too big to move the needle on earnings through its underperforming international stores. Worse still, the big box megastore format Wal-Mart and others rode to greatness during the last three decades of the 20th century is a dinosaur in the world of and the like.

Sozzi sees Wal-Mart's increased focus on small-box, urban stores as additional evidence of a chain that's lost its way.

Just in case what you see from Wal-Mart doesn't convince you, consider what the chain is keeping from us. Sozzi and I agree that an early sign that Wal-Mart wasn't clicking on all cylinders was when the chain stopped releasing same-store sales on a monthly basis. At the time Wal-Mart noted a desire to focus on its long-term goals. Curiously, when Wal-Mart was building a long-term juggernaut, it was more than happy to share the news as often as possible.

Sharp, gutsy, analysts are harder to come by than you may think. When we find one, we're going to put him on the show and listen to what he has to say. If you want to know about the retail firmament in America and Wal-Mart in particular, you'll carve out a few minutes and listen to Brian Sozzi.

After you do, send us an email with your comments and questions to

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