By The Sizemore Letter<\/u><\/p>\n
Watch Jeff and I duke it out over Wal-Mart’s (<\/span>WMT<\/a>)<\/span> earnings release.<\/p>\n From Jeff Reeves at The Slant<\/a>:<\/strong><\/em><\/p>\n Charles Sizemore, editor of the\u00a0Sizemore Investment Letter<\/em><\/a>, is a good friend and a great investor. But friends often disagree \u2014 as Charles and I do on\u00a0Walmart<\/strong>\u00a0(WMT<\/a>) stock and Walmart earnings.<\/p>\n Me, I see Walmart as a retailer in trouble. As I wrote in\u00a0advance of Walmart earnings<\/a>, the excuses about a cold, wet spring and income tax checks don\u2019t mask the underlying problem of weak consumer spending at home and big investment abroad that has yet to pay off substantially for shareholders.<\/p>\n Walmart earnings on Thursday\u00a0validated these headwinds<\/a>\u00a0as sales missed, the outlook was slashed and the stock fell. And in the near- to medium-term, I see continued trouble for Walmart stock.<\/p>\n But Charles has a different take, and a long view that places Walmart stock at the top of the market when it comes to returning capital to shareholders via dividends and buybacks. Consider for a moment that its dividend has exploded from 22 cents a quarter in 2007 to an amazing 47 cents a quarter currently \u2014 a 113% increase in just five years!<\/p>\n And bigger picture, Charles says the risk posed by Walmart earnings declines and sales trouble isn\u2019t necessarily a risk that just applies Walmart but the U.S. economy generally. He notes that Walmart makes up 10% of non-auto retail sales in the U.S. and that any downturn here is in fact a reflection of the macro picture \u2014 not poor management.<\/p>\n As such, that shouldn\u2019t mean underperformance since broadly the market will be feeling pressure as a result. Retail stocks from\u00a0Target<\/strong>\u00a0(TGT<\/a>) to\u00a0Macy\u2019s<\/strong>\u00a0(M<\/a>) to\u00a0Gap<\/strong>\u00a0(GPS<\/a>) will feel the pain, as will other stocks that rely on consumers.<\/p>\n I admit Charles has a good point to be made about the long-term potential, and he admits that there\u2019s no reason to run out tomorrow and buy Walmart given the short-term headwinds.<\/p>\n So maybe we are both right. Or both wrong.<\/p>\n Time will tell!<\/p>\n<\/blockquote>\n Note from Charles: Target even trumps Wal-Mart in terms of shareholder friendliness. \u00a0Both retailers have been monster dividend raisers and share repurchasers in recent years.<\/p>\n SUBSCRIBE\u00a0<\/b><\/a>to\u00a0Sizemore Insights<\/em>\u00a0via e-mail today.<\/p>\n\n