William Blair Remains Bearish On Wal-Mart Shares Due To Secular Concerns


William Blair analyst Mark Miller, reiterated an Underperform rating on Wal-Mart Stores (NYSE:WMT), as comparable-basis operating profit (excluding lease reclassifications) and operating EPS were modestly below expectations, according to the company’s third-quarter earnings release. No price target was provided.

Miller wrote, “Stepping back, management’s priorities to invest in wages and e-commerce are appropriate, in our view, considering Walmart ranks lowest in our customer satisfaction research among the retailers in our coverage. Identifying the issues and solving them are different matters though, and we do not concur with management’s assessment that the blurring of lines between digital and physical are “great opportunity for Walmart.” Rather, we believe the company’s exposure to large-format stores is a significant liability, evident in the disparity between the 5.5% comps for Neighborhood Market and flattish comps for Supercenters. Also, e-commerce migration is degrading general merchandise sales globally. The 9% same-store traffic decline in China (down 17% over two years) is particularly worrisome, although not necessarily surprising, as we find that identicalitem prices for Alibaba’s Tmall offering (BABA $118.20) are 15% cheaper than Walmart China stores. We maintain our Underperform rating, due to these secular concerns, and recommend investors trim holdings into the ephemeral benefit of lower gas prices.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Mark Miller has a total average return of 2.6% and a 50.0% success rate. Miller has a -10.2% average return when recommending WMT, and is ranked #1538 out of 3389 analysts.