Are Wal-Mart's mixed earnings data a warning to the world?
The largest retail company on earth reported lower-than-expected revenues of $129.7 billion for its most recent quarter while its $1.60 per share earnings were at the bottom of it previous guidance's range. Same-store sales in the US were down 0.4%.
Wal-Mart also guided down expectations for 2014, saying it foresees this year's earnings as coming in between $5.10 and $5.45 per share versus Wall Street's previous estimate of $5.54 per share.
The company gave a few reasons for its results, including bad weather and reduced government assistance in the United States and store closings in India and Brazil. Foreign currency losses cost Wal-Mart an incredible $5.1 billion in the last quarter. It also says higher taxes, higher health care costs, and tighter credit will also bit into its numbers this year.
CNBC contributor Gina Sanchez, founder of Chantico Global, Wal-Mart's quarterly data is saying something about the economy as a whole.
"Obviously, it's troubling that Wal-Mart showed weaker earnings and sales than they did post-," says Sanchez. "But, that's not surprising considering wages haven't really grown and it's going to affect the lower-end consumer far, far more."
Wal-Mart also has internal issues to contend with as well, according to Sanchez. "I'm not very excited about Wal-Mart," she says. "I think it's a difficult story right now. But, on the whole, I do think it's a little bit troubling for the economy and I think that we have to watch this."
Difficulties for the global consumer on the low-end are weighing on Wal-Mart's numbers, according to CNBC contributor Andrew Bush, editor and publisher of The Busch Update.
"Wal-Mart's a good indication of the problem of income inequality not only in the United States but globally," says Busch, who predicts Wal-Mart will eventually support a higher minimum wage in the US. "That's some of the problems that are going on in the emerging markets."
Busch also has a dim outlook for Wal-Mart based on the stock's technicals. After bottoming out at around $49 in the summer of 2011, the stock moved along an uptrend line which broke in April 2013, according to Busch's charts. He sees the stock currently in a $12-wide slight uptrend channel. But, the bottom of that channel is roughly $71.80 per share, near where the stock was trading as of Friday.
"Overall, you're trending toward the bottom-end of that channel," says Busch. "I would sell Wal-Mart because of these issues that they have if you get a weekly close below $72."
"Watch these guys. Again, they're being hurt just as much as their consumers are being hurt … because their wages aren't really rising."
To see the rest of the discussion on Wal-Mart with Sanchez on the fundamentals and Busch on the technicals, watch the video above.
- Consumer Discretionary