A Citi analyst has taken Wal-Mart Stores Inc.'s stock off her top-pick list just ahead of the retailer's quarterly earnings report on Thursday.
THE OPINION: Analyst Deborah Weinswig said in a research note late Monday that she is removing Wal-Mart her firm's top-picks list on concerns about some near-term pressures on the world's biggest retailer.
The analyst said that February got off to a weak start and she is concerned that soft sales continued into March and April. Additionally, she believes that higher payroll taxes, which curb how much cash consumers have to spend at the store, became a more significant challenge. This, along with delayed tax refunds, a lack of food price increases and poor weather, could put added pressure on Wal-Mart for the period.
Weinswig is forecasting first-quarter earnings of $1.14 per share. That is just below the average analyst forecast of $1.15, according to FactSet.
Despite her short-term concerns, the analyst said that she continues to believe that Wal-Mart is well-positioned to benefit from any increases in consumer spending. She reiterated a "Buy" rating on the company's stock and raised her price target to $89 from $82.
Investors and economists are still keeping a close eye on the impact of higher payroll taxes on consumer spending, which is a major driver in the economy.
The Commerce Department reported Monday that retail sales edged up 0.1 percent in April. That's an improvement from a 0.5 percent decline in March, the largest drop in nine months
The economy grew at a 2.5 percent annual rate from January through March. The gain was largely because of the fastest growth in consumer spending in more than two years. But most of the increase came from greater spending at the start of the quarter.
Some economists had worried that the weak month of spending in March was a sign that the tax increase was starting to catch up with consumers.
THE STOCK: Wal-Mart's shares increased 16 cents to $78.66 by early afternoon. Its stock remains near the top of its 52-week trading range of $58.95 to $79.50. Wal-Mart's stock price is up more than 30 percent since this time last year.
- Consumer Discretionary