WMT | Biggest Reads are Not WMT (Macro, TGT, AMZN, HBI)

02/21/17 02:33PM EST

It’s easy to say ‘WMT Killed It’ especially for someone who is Long the stock (me). The reality is that the quarter was terrible – de-leveraging 1% sales growth into a 12% EPS decline. But on the margin – where the market lives – it was definitely better (yah…NewsFlash, I know). There are a few take-aways, only one of which really has to do with Wal-Mart.

  1. #growthaccelerating.  Keith and our Macro team are looking for GDP acceleration to 4.2%yy growth by 2Q. WMT just put up its best US comp in nearly five years. Check.
  2. Traffic was up 1.4%, accelerating from 0.7% last quarter. That’s now nine quarters of positive traffic for WMT. E-comm up 36% -- off an admittedly low base of 3% of sales. But growth is growth.
  3. I still think that McMillon will be CEO of the year. He took up investment spending in stores, in both online and in-store content, and bought an e-comm infrastructure WMT failed to build over the course of a decade. Expectations – over TREND and TAIL duration – are in-check and very doable (even with the AMZN grocery call). Check.
  4. Speaking of AMZN, WMT just accelerated 4Q growth in the US while AMZN slowed on the margin. I know I’m nit picking here giving the parabolic 21% growth at AMZN. But numbers are numbers, yes AMZN added $4.5bn in 4Q US revs, but WMT was not too far behind at $2.3bn. That spread is narrowing. That’s a #fact that matters with WMT trading at 8x EBITDA and 16x EPS, with AMZN at 32x EBITDA and ‘infinity’ times earnings.
  5. Don’t extrapolate this to Target. WMT ‘out-trafficked’ (that’s now a word, fyi) TGT last quarter by 350bps. It’s gonna happen again, imo, with limited growth in AUR/basket at TGT. As good as McMillon is – that’s how bad Cornell is. He’s done the opposite. Underinvesting in the core (check out the SG&A per ft analysis below – WMT accelerated again this quarter #investing. TGT likely to decel -- again), buying stock at the peak, with literally no levers to pull to grow this business. I don’t think he’ll be living in Minny on the last day of 4Q.
  6. This is a very bad read for HBI. Check out the following. LINK: HBI | WMT = Another Big Tell re Rev/Margin/Covenant Risk
  7. WMT SIGMA looks stellar. Great 4Q Gross Margin setup.

WMT | Biggest Reads are Not WMT (Macro, TGT, AMZN, HBI) - 2 21 2017 chart1

WMT | Biggest Reads are Not WMT (Macro, TGT, AMZN, HBI) - 2 21 2017 WMT traffic

WMT | Biggest Reads are Not WMT (Macro, TGT, AMZN, HBI) - 2 21 2017 WMT SG A

WMT | Biggest Reads are Not WMT (Macro, TGT, AMZN, HBI) - 2 21 2017 WMT 1

WMT | Biggest Reads are Not WMT (Macro, TGT, AMZN, HBI) - 2 21 2017 WMT 3

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