Wal-Mart (WMT) reported results for their fiscal fourth-quarter this morning, beating earnings estimates but guiding slightly lower for the current period. The numbers are actually worse than they appeared. Same store sales in the U.S. rose an anemic 1% and much of the 10-cent earnings beat was the result of a lower than expected tax rate.
Brian Sozzi, chief equities analyst at NBG Productions says the results were "horrible." In the attached clip he ticks through his concerns noting that store traffic was low, margins were weak, and inventory is too high relative to sales.
From the perspective of a merchant, if a company is investing so much time and energy into low prices, either the traffic needs to be high or the inventories have to running lean. Running deep discounts and still not being able to move product is so bad that Sozzi relabeled the quarter as "straight up atrocious" because horrible didn't quite cover it.
As a stock Wal-Mart has been dead money for the century to date, having ended the '90s at $69.125 and closing yesterday less than 10-cents higher. What matters about the company is that its massive size gives it a sweeping view of the mid to lower-end of the U.S. economy. Sozzi doesn't like what he's seeing from that perspective either.
Walmart is seeing what's called a pronounced pay check cycle. That means store traffic spikes twice monthly when most people get paid. That speaks to a strapped consumer that lacks the confidence to spend unless they literally have cash in their pocket. Living paycheck to paycheck isn't something you typically see in the fourth year of an economic recovery.There's a limited pool of winners from Walmart's weakness but they do exist. Sozzi thinks Amazon (AMZN) and Best Buy (BBY) of all companies may have picked up some of the sales Walmart didn't get, but that's not a ton of comfort.
"The big theme: they can't get any margin, they have no pricing power and the consumer is not going to the store as much as they used to," says Sozzi.
Let's see Walmart stick one of its trademark happy faces on that.