This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Challenges the New Wal-Mart (WMT) CEO Must Tackle

NEW YORK (TheStreet) -- New Wal-Mart (WMT - Get Report) CEO Doug McMillon has his hands full only three days into the new role. The new chief executive and former head of Wal-Mart's international business assumed the position on Saturday, succeeding president Mike Duke.

The megastore chain, due to report full fourth-quarter results on Feb. 20, issued tempered guidance for the quarter below analyst expectations on Friday. Fourth-quarter earnings are believed to be at the low-end or below a previous range of $1.60 to $1.70 a share. For the full year, earnings are expected at or slightly below the low-end range of $5.11 to $5.21 a share.

Analysts surveyed by Thomson Reuters expect fourth-quarter earnings of $1.62 a share and full-year earnings of $5.14 a share.

Wal-Mart expects slightly negative comparable sales growth for both its namesake store and membership-only Sam's Club. Previous guidance had Wal-Mart with flat comps and Sam's Club with growth as high as 2%.

Must Read: Southwest Airlines (LUV) Falls Despite New Nonstop Flights Announcement

A short-term reason for lower sales was a winter more severe than normal with several debilitating snow storms causing store closures and disrupted foot traffic.

A problem for the long-term, sales were hampered by a reduction in the government's Supplemental Nutrition Assistance Program (SNAP), more commonly referred to as food stamps, which went into effect Nov. 1. The reduction was tied to the expiration of a temporary increase in benefits passed in 2009 as part of economic stimulus efforts.

"The sales impact from the reduction in SNAP ... is greater than we expected," explained Wal-Mart CFO Charles Holley in a statement Friday.

Another ball in the air, The Wall Street Journal reports Monday that Wal-Mart has informed the National Labor Relations Board (NLRB) it was legally allowed to discipline workers for participation in short strikes. The retailer argued non-traditional short strikes could not be distinguished from absenteeism and employees could be dealt with accordingly.

Over the past 24 months, more than 100 employees have walked off the job in protest only to return as normal for their next shift. Two weeks ago, the Labor Relations Board filed a complaint against Wal-Mart for its disciplinary action against workers involved in these short-spurt protests.

But it isn't just problems on Wal-Mart's home turf that the new CEO needs to contend with. The company said international headwinds out of Brazil and China will likely impact fourth-quarter results, too.

In the January-ended quarter, the retailer expects to absorb a 6-cents-a-share hit to earnings resulting from 50 store closures in Brazil and China. Additionally, non-income tax contingencies in Brazil will lower the bottom line by 6 cents a share, while employment claim contingencies will cut it by 5 cents a share. In China, store lease expense charges will diminish profit by 3 cents a share.

Last week, McMillon received a vote of confidence before he had even assumed the top job. Credit Suisse analyst Michael Exstein upgraded the stock on the view the new CEO could "alter WMT's long-term strategies, rather than focusing on repairing short-term issues."

One long-term strategy Wal-Mart is already planning to introduce is a series of "Neighborhood Market" stores, small-store formats with a focus on general merchandise rather than an everything-in-one-place style. Wal-Mart currently operates around 300 of these stores and plans to introduce several hundred more.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
WMT $59.92 -0.56%
AAPL $118.88 0.96%
FB $105.74 -1.13%
GOOG $748.28 -1.02%
TSLA $218.25 0.23%


Chart of I:DJI
DOW 17,812.19 +19.51 0.11%
S&P 500 2,089.14 +2.55 0.12%
NASDAQ 5,102.8080 +0.33 0.01%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs