To: Maurice S. Green who wrote (23 ) 10/6/1998 10:48:00 AM From: Platter Read Replies (1) | Respond to
RETAIL STOCKS. A lot is hinging on whether the U.S. economy holds up, and a lot of that depends on whether consumer spending stays strong. Many retail stocks have been taking a hit lately. Look at top-quality Wal-Mart (WMT 57 1/4). The stock ended its steady rise in July after it hit a high of 69 13/16. Concerns over weakening domestic demand have taken a bit of air out of this pricey stock. But business remains strong. In the recently ended second quarter (Jul) revenues rose 18% and per share profits 31% compared to year earlier levels. This morning, WMT announced that same store sales for the most recent (5 week) period were up 15.5%. That is down a bit from the 17.3% pace for the year as a whole, but still very strong. WMT also announced that they are continuing their aggressive store opening schedule. The data for WMT still look very good and the market might be discounting more weakness than is likely for what is obviously a well-run company. Specialty retailers are subject to more volatility. This morning, Sporting goods apparel maker The Sports Authority (TSA 6 3/4) is warning that it will report a much larger loss than expected, continuing its recent problems. Office Max (OMX 8 3/4) is warning that it will report earnings below expectations due to weak computer and business machine sales due to weak prices. Both of these stocks will probably take a hit today. However, the WMT data shows that for now, consumer spending in the U.S. remains strong. If the economy holds up reasonably well, major retail stocks, which have discounted a softening in demand, could provide a "safe haven" and outperform the indices while international turmoil persists. From Brieifng.com
