To: +Leo Francis (56 )
From: +Leo Francis
Now you're talking to yourself, Leo. That is not a good sign.
It is true, though, that the current run may be winding down.
-------------------------------------------------------------
RETAIL STOCK OUTLOOK: Expect June Sales To Be Generally In-Line; Ear
07:54am EDT 8-Jul-97 DLJ Securities (Gary Balter)
DLJ ****** DONALDSON, LUFKIN & JENRETTE ****** DLJ
July 8, 1997 Gary Balter (212) 892-4228
Candler Young (212) 892-4529
Doug Donovan (212) 892-8906
RETAIL STOCK OUTLOOK
Expect June Sales To Be Generally In-Line;
Earnings Outlook For Retailers Is Better Than For Market
Wal-Mart
Wal-Mart's comps should be in line at the lower end of expectations for the second month in a row. However, comps levels are much less important for Wal-Mart than inventory management and gross margins and these continue to be positive. Better weather has given some lift to the seasonal sales at the discount stores and club stores. But at Sam's, sales are running in the 1-2% versus their original plan of 3-4%. While the company will eventually need to see better sales to sustain its current momentum, investors remained focused on the company as a cash flow generator committed to enhancing shareholder value. As long as the retail environment remains friendly, this stock will continue its move towards $40. We continue to rate Wal-Mart market perform.
----------------------------------------------------------
Goldman, Sachs & Co. Investment Research
NOTE 7:46 AM July 08, 1997
13 Broadlines Retailers
George Strachan (212) 902-6708
Scott Lange 212 902-6747
Federated Department Stores (FD) $36.00
EPS (FY Jan): 1998E $2.45, 1999E $2.85 - Recommended List
Wal-Mart Stores, Inc. (WMT) $35.19
EPS (FY Jan): 1998E $1.53, 1999E $1.72 - Market Outperformer
* No changes in company estimates nor our recommendation to market weight Broadlines Retailers; June sales remained unexciting.
* Discounters continue to demonstrate stronger momentum than department stores with both Wal-Mart (Division I) and Target likely to report superior comparable-store sales gains.
* Department Stores ended the first quarter with generally heavy
inventory; mediocre May/June sales gains increase the possibility of second-quarter markdown pressure on gross margin.
* Given current low relative valuations and, in many cases, easier second-half comparisons, a 'mini-rotation' into department store stocks could lie ahead; we continue to recommend purchase of Federated, Sears, and Saks.
* Variety discounters continue to generate strong top-line results, with comparable-store sales for the group likely to rise in a mid-to-high single digit range; we recommend purchase of Dollar General and rate all other stocks in this sector market outperformers. |
