Bloomberg is reporting that Wal-Mart Stores, Inc. (WMT, $74.65) is cutting orders with suppliers through the fiscal year-end in January, in order to remedy a recent problem with rising inventories. The inventory problem stems from tighter consumer spending, and a lack of manpower to keep shelves stocked.Wal-Mart has increased its number of stores by 13% over the last five years, while cutting its workers by 1.4%.S&P comments, “While we do think consumer spending remains choppy, we do not believe this report signals a negative inflection in trends.”
Wal-Mart missed analysts’ earnings projections in each of the last five quarters, as payroll taxes and poor global economies wreak havoc with customers’ spending patterns.To offset economic woes, Wal-Mart aims to double its sales of beer and liquor by 2016.Earnings per share growth projections have been falling all year, from 10% expected growth back in February to 4% today.The price-earnings ratio (PE) is 14.3, in a four-year range of 11-15.The dividend yield is 2.52%.
Wal-Mart’s share price peaked in May and has since trended slowly downward.Since there’s no catalyst on the horizon to cause the share price to rise, we think shareholders would likely achieve growth of capital more quickly by selling their Wal-Mart shares and purchasing stock in a company with double-digit earnings growth.It would also be wise to use stop-loss orders, in case the stock price falls below recent support around $72.
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