RETAIL STOCK OUTLOOK: Sales Strengthen in July Easy Comparisons Due
08:08am EDT 24-Jul-97 DLJ Securities (Gary Balter)
DLJ ****** DONALDSON, LUFKIN & JENRETTE ****** DLJ
July 24, 1997 Gary Balter (212) 892-4228
Doug Donovan (212) 892-8906
Jeff McMahon (212) 892-2351
RETAIL STOCK OUTLOOK
Sales Strengthen in July
We continue to see signs that retailers are tightening inventory, utilizing less markdowns, and controlling expenses in a concerted effort to improve bottom line results. For most of the retailers we are very optimistic about the second quarter results which will be reported throughout August. In particular, we expect the best earnings performance to come from Home Depot#, Dayton Hudson#, General Nutrition+*, Wal-Mart #, Costco+*++@, CompUSA#, and Borders+#. We continue to expect retail stocks to outperform the market as these retailers report strong second quarter results, better than the market.
WMT#
Sales at Wal-Mart's discount stores have been running ahead of the 4-6% plan, implying comps in the high single digits. And while sales at the clubs have been less than stellar, the company seems to have tremendous momentum as almost everything continues to fall into place. As the company keeps inventories tight and continues to rationalize expenses, we see the potential for a fatter and fatter bottom line.
In fact, we believe that the company even has some leeway to do some different things to try to improve performance and still have enough left to make the earnings. We continue to expect Wal-Mart stock to outperform the market near term and view it as a core holding for our more favorable retail outlook. Look for strong earnings on August 12th when they report. |
