Walmart Stock Slips As Anxiety Market Stymies Pop Day Results

Walmart shares (WMT) slid Thursday despite the release of a report on earnings and optimistic forecasts.

Shares of the Bentonville, Arkansas-based retail giant slid 2% below the century mark, closing at $ 99.54.

This decline occurred despite a profit report that predicted earnings per share of $ 1.08 per annum, according to analysts' previous estimates, and a higher than estimated turnover after taking into account the monetary disaster. which hindered the results.

Run up against the market

Part of the problem is that Walmart is out of sync with the market after the October corrections.

While the S & P lost two digits, Walmart grew about the same margin.

Jeff Marks, Senior Portfolio Analyst at Jim Cramer's Action Alerts Plus Charitable Trust, explained that the retail sector has become overbought because of the "safe trade" in the retail business, backed by the strong consumer American.

Marks noted that this observation helped his team out of their position on Nordstrom (JWN) two weeks before its results. Since its peak in late October, Nordstrom has dropped from about $ 67 a share to just $ 54 a share after the sale on Thursday.

Cramer, the portfolio manager of the trust, pointed out that earnings figures from companies like Walmart were not bad, but that they were rather caught up in current cyclical worries.

"I immediately heard that nothing went wrong with Walmart, on the contrary, everything was good, so good that nothing could be better, because we are at the end of the cycle", wrote Cramer in his column Thursday. "This is becoming almost circular reasoning.The stock can not go up because it's the end of the cycle and it's the end of the cycle because the stock is down.It's exactly what's going on. Is past. "

Bernie and Buffett

The release of Warren Buffett, who had long held the reserve for the retail trade, added to the concern of people fearing an invasive bear market.

According to a recent 13-F filing, Berkshire Hathaway (BRK.A) (BRK.B) has unloaded 1.4 million shares of Walmart, thus ending the long-standing relationship.

The news of the cup coincides with the negative attention of Bernie Sanders.

US Senator Vermont and former presidential candidate of the Democratic Party on Thursday proposed the "Stop Walmart Act" to force the company to increase its wages when its margins were already very small.

The law would prevent the company from buying back its own shares unless it pays $ 15 an hourly wage to its employees. Although targeted by both his name and some vitriolic statements from Sanders' Twitter account, the proposed bill would apply to any business with more than 500 employees.

While Walmart claims it can not afford to pay $ 15 an hour to its employees, it has been able to find enough money to pay more than $ 22 million to its CEO. last year.

Tomorrow @RepRoKhanna and I will present The Stop WALMART Act to end their scandalous greed.

– Bernie Sanders (@SenSanders) November 14, 2018

Sanders notably called on Amazon's President (AMZN), Jeff Bezos, to increase his minimum wage in September through his "Stop Bad Employers by Zeroing Out Subsidies" law, also known as "Stop Bezos" Act ", because of its intelligent acronyms.

Bezos has in fact yielded to the pressure after a short period, which has been closely scrutinized for its true motives, one of them being able to increase costs for the main competitors as well. it automates its workforce.

It remains to be seen whether Walmart executives react in the same way to those of Amazon.

Margins and Macro Pressure

Another problem for the Amazon-related company is a likely price battle for shoppers on vacation with the mass-produced disruptive retailer.

"Today, the pressure seems to weigh on people who are worried about the squeezing of margins that could result from heavy price cuts during the holiday season," analyst Real Money told Reuters. Action Alerts Plus, Zev Fima. "Amazon's Black Friday offers start on November 16 and you know that all other retailers will have to be creative to compete and, in this case, creative means discounts."

Of course, any discussion of margins would be incomplete without the two T's of pressure on margins: transportation and fares.

"Rates are not positive for the economy," said Brett Biggs, chief financial officer of Walmart, during a conference call Thursday morning. "Prices will go up."

This seems self-evident, but the pressure will be particularly strong for Walmart in a likely price battle given that the company supplies in a good part of its products, up to 70% in fact, coming from from China.

"The uncertainty surrounding China, where Walmart recovers a large amount of its products, adds to the pressure on prices," said Fima, who believes that these factors may weigh on equities, especially after the retailer it is imposed as a rare winner of the October correction.

The bullish remains

Nevertheless, the slide in the market and the pressure on margins do not prevent analysts from waiting for the future of Black Friday and beyond.

"Compilations from WMT outperform the impressive customer traffic that goes on between the stores and the digital," commented Oliver Chen, an analyst at Cowen. "The retailer did a good job of leveraging the in-store costs with powerful products, and we would be buyers in case of potential weakness given a 1.6% increase in EPS."

He explained that the excellent results of the third quarter bode well for the company's best season, especially as the retail space becomes less crowded.

"Lots of stockings will be stuffed with WMT products," said Chen.

Much of the storage will also be done numerically, judging by the strength of the company's e-commerce segment.

Walmart CEO Doug McMillon announced plans to continue his national digital growth after growing 43% in the quarter.

The company's e-commerce push in the US is helping it compete with eBay (EBAY) and Amazon's e-commerce crown, according to recent figures released by eMarketer.

Walmart's already impressive growth opportunities are backed up by a strong overall retail environment.

The US Department of Commerce announced Thursday that retail sales and food services rose 0.8% in October to $ 511.5 billion, exceeding the expectations of a monthly advance of 0.5 %.

This suggests that even though many speculators fear a bull market, the US consumer still has not been paid and the expenses are in effect.

These indicators are reinforced by the employment and wage figures released earlier this month, which reflect a broader base of employed consumers with greater spending power.

Walmart's results suggest that much of this spending power is also going to some of the big box retailers.

"The recent results of Walmart and Costco (COST), as well as the likely target (TGT) when they report next week, show that large retailers investing in multichannel are taking shares in a favorable business environment. United States, "wrote Greg Melich, an analyst at MoffettNathanson on Thursday. "The recent moderation in Amazon's growth, as well as competitors' closures, do not hurt either, with Toys R Us, Sears (SHLD), Fred's (FRED) and even the donors in shares named Family Dollar. "

JCPenney (JCP) has its own problems and can give some of the gift sales at Christmas.

Among the favorable winds available, analysts' consensus remains a "buy" for Walmart, according to factset data with a price target of about $ 105 per share.

For optimistic investors in the retail market, the bearish slide on Thursday could offer a solid buying opportunity. Much of Wall Street certainly thinks so, even if the market is not yet.