Month Means Little for Wal-Mart

Wal-Mart today reported that comparable store sales were lower than anticipated by analysts and, during an up day on Wall Street, its stocks lost ground, proving once again that monthly numbers are never so consistent as in their misinterpretation.

Wal-Mart got hit â€" with shares losing almost four percent of their value -- based on skepticism about the company's given reason for why it had fallen short of analyst consensus estimates for comparable store sales, or sales in stores open for at least a year. Retail Metrics put the consensus estimate at 3.2 percent. The problem was the change in Easter, said Wal-Mart, which shifted three weeks from late March to mid April, taking sales out of one month and assigning them to the next. Even without the Easter candy money, the retailer managed a not insubstantial, given the times, 1.4 percent comp increase for stores in the United States.

The skepticism arises because investors and others assume that analysts will accurately anticipate the affects of a holiday shift, but doing so is enormously difficult and may not even be the definitive factor in establishing an estimate. Applying historical trends can be particularly difficult this year. For one thing, cautious consumers are purchasing closer to need and to actual holidays as they wait for what bargains retailers might offer. On top of that, Wal-Mart has gone from being primarily a discount store chain to becoming primarily a food retail chain over the past decade with supercenters at its core. Discount store chains don't get the lift from Easter that food retailers such as supermarkets and supercenters do, so the holiday effect may be greater than anticipated.

So, what does it all say about actual operations at Wal-Mart? Standard & Poors analyst Joseph Agnese had set a 5.2 percent comp estimate for March â€" the company posted a 5.1 percent comparable store sales gain in February -- watched the actual number come in at 1.4 percent and still kept his recommendation on the company's shares at strong buy. Part of the reason for that was Wal-Mart's valuation relative to other retail chains. Still, Agnese determined, he said in a research note, that the Easter calendar shift had hurt the comp number as had unfavorable foreign exchange rates. Also he asserted that the retailer's staple and home products continue to perform well, which should help drive an anticipated 2.9 percent increase in comparable store sales. Despite his estimate and the low number, Agnese decided that Wal-Mart's operations supported purchasing its shares, certainly a vote of confidence in the company's performance in the trenches.