NEW YORK (Real Money) -- Wal-Mart (WMT - Get Report) shares were hit Thursday on a tepid full-year earnings forecast, in large part due to $1 billion in investments to treat disenchanted employees better.
Investors, however, may have overlooked a comeback quarter from the world's largest retailer. Here are a couple areas of high intrigue:
Store traffic: Increased by 1.4%, the first gain in nine quarters. This is the purest sign yet that average consumers are starting to trust their new-found wealth, created either by a new job or a cheaper gas fill-up. Indeed, this bodes well for the spring selling season, not just for Wal-Mart, but for best-in-breed retailers such as Under Armour ( (UA - Get Report) ), Nike (NKE - Get Report) and Macy's (M - Get Report) .
Wal-Mart U.S. same-store sales: Finally increased to the tune of 1.5%. The improvement here could be traced to a couple of things outside of consumers visiting the stores more often. Wal Mart has tightened up its operations -- shelves are stocked and checkout lines are moving quicker. Although pulling tat off has required labor investments, it's encouraging that the company is receiving associated sales benefits. And it could be receiving profit benefits as gross margins beat consensus forecasts and rose 21 basis points year over year. That is no small feat during the highly competitive holiday season. I am a big fan of new Wal-Mart U.S. CEO Greg Foran, a very operationally minded fella.
Neighborhood Markets: Notched a 7.7% same-store-sales increase, above the 5.5% average for most of 2014. To see the total comp sales increase, plus the gain at smaller format stores, suggests Wal-Mart's giant supercenters are not performing as poorly as they were for the majority of last year.
The market is right to focus on the guidance, initially. In my view, we are seeing the great Wal-Mart business model -- pay workers lean wages, reinvest the savings in lower prices -- unwind right in front of our eyes. Wal-Mart's stepped-up pace of employee-related investments underscores the changing sea its large ship is navigating. However, underneath the cost headwinds, Wal-Mart delivered a rock solid quarter that hints Target's (TGT - Get Report) holiday performance was even merrier.
I am not opposed to nibbling at Wal-Mart on weakness. Believe me, that's a tough one for me to say.