BENTONVILLE — Wall Street is watching to see if Walmart improves U.S. sales when the retail giant reports fourth quarter earnings Tuesday.
Analysts estimate profit of $4.71 billion, down 2 percent from a year ago. But they also forecast sales of $117.88 billion, up roughly 4.5 percent from last year. The company’s 2011 fi scal year ended Jan. 31.
Walmart posted negative same-store sales growth for the past six quarters. Despite ongoing challenges with U.S. sales, Walmart’s international business is growing.
Weak U.S. sales caused a trio of analysts to downgrade Walmart’s stock rating to neutral or hold over the past couple weeks.
J.P. Morgan was the most recent analyst to move, lowering its target price from $59 to $54 on Monday.
“While sentiment on the stock is hardly upbeat, we don’t foresee a positive catalyst on the horizon that would break the stock out of its 10-plus year trading range ($45-$60),” Charles Grom wrote in a research note.
Grom points to same-store sales deterioration in U.S. stores as a problem that could last multiple years.
Same-store sales, or comp sales, are based on sales in stores open for the previous 12 months. Analysts use the fi gures to gauge sales growth.
Bill Simon, president and chief executive officer of Walmart U.S., predicted a turnaround in the fourth quarter.
“What’s most important now is that we are in a position of strength for the busiest and most critical season of the year, and we’re expecting a positive comp in the fourth quarter,” he said in November during third quarter earnings release.
Simon said he expected positive holiday comp sales and forecasted quarter samestore sales to range from minus 1 to plus 2 percent.
“We don’t think Walmart had a great holiday season and, if anything, believe the comp trend became sequentially worse as the quarter progressed,” Grom wrote in his note.
That seemed to be a trendin holiday shopping, according to James Russo, vice president of Global Consumer Insights for The Nielsen Company.
He said there was an early push for holiday shopping, but strong sales before Thanksgiving robbed retailers from the back side of the season.
Neil Currie, UBS analyst, also predicts lower comps and lowered his stock position Feb. 10. He dropped his forecast from a positive 0.3 percent to negative 0.8 percent, and said he wouldn’t be surprised if it came in even lower.
Deutsche Bank downgraded Walmart from buy to hold Feb. 2. Analysts reduced the retailers target price from$66 per share to $60.
A poll of 23 brokers by Thomson Reuters forecast a $60.57 average target price. The group has a high 12-month target of $68 and a low of $50.
Wall Street Strategies analyst Brian Sozzi forecast a fourth quarter net income of $4.69 billion and has the retailer’s target price at $50. He downgraded Walmart to sell in mid-December, predicting a tough fourth quarter.
Bernie Sosnick with Gilford Securities said he hasn’t written any research notes on Walmart since early December.
“I’m waiting to see what pops out of the earnings release,” he said Tuesday.
His Dec. 9 research note states Walmart has the potential to rise to $70 in 12 months. The prediction was made in the early holiday shopping days when sales were strong.
Citi analyst Deborah Weinswig also lists Walmart as a buy, with a target price of $63. She predicts Walmart will have 0.3 percent comp sales growth for the quarter.
Walmart spokesman Greg Rossiter said the retailer had no comment ahead of Tuesday’s earnings release.
Walmart (NYSE: WMT) shares closed at $55. 39 Friday, up/down 64 cents or 1.17 percent from Thursday. Stocks traded between $47.77 and $57.90 during the past 52 weeks.
Business, Pages 9 on 02/20/2011