Wal-Mart investors await new strategies
Thousands of Wal-Mart Stores Inc. investors and employees will pack a sports arena Friday for the retailer’s annual shareholder meeting, a mix of music celebrity flash and serious business with a pinch of criticism from dissident shareholders.
Investors will be closely watching the presentations by Chief Executive H. Lee Scott Jr. and top executives for word on growth strategies after the company warned that second-quarter profit may fall short of Wall Street’s expectations.
The global retailer typically packs the 18,000-seat Bud Walton Arena at the University of Arkansas in Fayetteville, about 30 miles south of Wal-Mart’s headquarters in Bentonville, Ark.
Shareholders including religious orders, unions and a free-market think tank are offering 11 proposals. Such measures typically fail to win majority support. This year’s proposals include calls for Wal-Mart to report on the gap in pay and benefits between its top executives and lowest paid workers, on the percentage of stock awards to employees based on gender and race, on the need for universal healthcare plans and on the grounds for its charitable giving.
It is always a well-choreographed event with a sprinkle of big-name performers to serenade the audience. Recent years included appearances by Garth Brooks, Jon Bon Jovi and Jessica Simpson.
At the shareholder meeting and at an analyst conference that immediately follows, analysts will be listening for any news on Wal-Mart’s growth strategies for its core U.S. namesake stores, whose sales dwarf its faster-growing international business and its Sam’s Club membership warehouse chain.
“What everyone is wanting to hear is that they are going to get it right on fashion and they’re going to get it right on home [decor],” said Patricia Edwards, a portfolio manager and retail analyst at Wentworth, Hauser & Violich in Seattle, which holds about 42,000 Wal-Mart shares.
Apparel and home furnishings are two areas that Wal-Mart has identified as its weakest, weighing down sales gains in electronics, food and pharmacy.
Wal-Mart is trying to find the right balance between low prices and adding more brand names to such departments as home electronics after a brief foray last year into higher-end fashions brought disappointing results.
Sales at established U.S. stores, a key retail benchmark, have been trailing those of rivals such as Target Corp. and fell in April by 3.5%, the worst showing in at least 27 years.
Wal-Mart warned this month that second-quarter earnings might miss analysts’ consensus of 79 cents a share as it offered more discounts and as high gas prices took cash out of the pockets of lower-income shoppers.
A.G. Edward & Sons retail analyst Robert Buchanan said he would like to see the company trim its longer term earnings guidance to reflect what Buchanan calls a more realistic level for a retailer that has grown into the world’s largest company by revenue.
Wal-Mart expects earnings this year of $3.15 to $3.23 a share, up 8% to 11% from $2.92 in its last fiscal year, which ended in January.
On average, analysts surveyed by Thomson Financial expect an 8% increase to $3.16 a share this year and an additional 11% to $3.51 next year. Buchanan sees just a 7% rise next year.
