Walmart was not immune to the economic downturn as so many analysts had predicted. Walmart saw its same store sales increase by 1.7% last month. Good news, right? You would think so but Walmart disappointed by falling short of analyst expectations of a 2.8% increase in comps. The nation’s largest retailer saw its shares decline $4.16 yesterday to close at $51.38. Walmart(WMT) cut its earnings outlook by 10% for 2009 citing lower sales growth and tighter operating margins.
Conversely, Sears saw their same store sales decline 7.3%. Sounds bad, right? Wrong again. Sears announced a profit higher than analyst predictions. Sears Holdings shares rose $9.43 to close at $49.98 per share. While the numbers are not good at Sears Holdings, Sears and Kmart both seemed to benefit from layaway programs. As stated in my post on November 28th, I thought that layaway would help entice credit weary borrowers to purchase items that they otherwise would not have purchased this year.
The name of the game is expectations. I find it interesting that Walmart’s stock slumped even through sales increased and Sears stock increased despite a sales decline. I suppose the lesson to be learned is that it’s better to have Wall Street underestimate your earnings potential than to overestimate.
