Big Box Retailers Have A Lot of Blame to Throw Around

Is the economy slowing or are consumers finally getting ready to spend more? Well based on the most recent retail reports from two industry giants Wal-Mart (WMT) and Target (TGT), it would seem the former slowdown is more likely. But let’s take a deeper look:

Wal-Mart was not the only company in its field to report lower sales than expected this quarter, and compared to Sears Holdings (SHLD) and K-Mart it might consider itself lucky: The quarter revenue at Sears declined 6.6% amounting to a loss of $132 million for the company.  Even worse, same-store sales in K-Mart declined 4.7%.

Wal-Mart (WMT) believes that underperforming results are part of a larger scale slowdown in the economy that has led certain segments to be more unwilling to spend.  As told to the New York Times, Charles M. Holley Jr., Wal-Mart’s chief financial officer, said, “I don’t think the economy’s helping us. If anything, our consumer’s are probably being a little more stretched because of gas prices.” Although the company’s overall revenue grew 4.5% in the second quarter, this amounted to only $114.3 billion, $1.5 billion lower than analysts expected. Considering the company is the nation’s largest retailer by far, these numbers should have a larger impact on the economy at large.

While all of these companies will blame the wider economic climate on their poor performance, Target (TGT) has reason to look inward following a sales increase of only 3.1% in the second quarter compared to 4.1% for the first quarter. One issue has been the companies continued feud with Amazon (AMZN). Target has refused to sell the Amazon Kindle after they believed they started to lose customers thanks to people coming into their store to examine products and then going home and purchasing them on the e-commerce giant for cheaper. Many analyst’s believe this preoccupation has distracted the brick-and-mortar retailer from focusing on growing the business overall.  Additionally, despite raking in over $4 billion in revenue during the period they were working with the advertising agency Wieden + Kennedy, Target decided to fire the firm which was later named agency of the year.

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How do you think these less than outstanding results bode for the retail sector as a whole? While some of these firms have poor internal management to blame, it could also be a harbinger of the overall economic climate and consumer confidence.

Listed below are the aforementioned firms along with their largest competitors.

Interactive Chart: Use the Compar-O-Matic to compare analyst ratings for the stocks mentioned below:

1. Target Corp. (TGT, Earnings, Analysts, Financials): Operates general merchandise stores in the United States. Market cap at $42.26B, most recent closing price at $63.98.

2. Wal-Mart Stores Inc. (WMT, Earnings, Analysts, Financials): Operates retail stores in various formats worldwide. Market cap at $244.12B, most recent closing price at $72.40.

3. Sears Holdings Corporation (SHLD, Earnings, Analysts, Financials): Operates membership warehouses that offer a selection of branded and private label products in a range of merchandise categories in no-frills, self-service warehouse facilities. Market cap at $41.71B, most recent closing price at $96.23.

4. Costco Wholesale Corporation (COST, Earnings, Analysts, Financials): Operates membership warehouses that offer a selection of branded and private label products in a range of merchandise categories in no-frills, self-service warehouse facilities. Market cap at $41.71B, most recent closing price at $96.23.

5. Dollar General Corporation (DG, Earnings, Analysts, Financials): Operates as a discount retailer of general merchandise in the southern, southwestern, midwestern, and eastern United States. Market cap at $17.02B, most recent closing price at $51.53.

6. Amazon.com Inc. (AMZN, Earnings, Analysts, Financials): Operates as an online retailer in North America and internationally. Market cap at $109.2B, most recent closing price at $242.90.

Written by Dan Connelly

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