Wal-Mart is the largest retail discounter in the world...

The King of Retail

October 8, 2008

These are not happy times for retail companies. Bargain-hungry consumers just aren't spending money like they used to. A lot of these businesses have ramped up discounts and special offers to pull American shoppers out of hiding, but September sales results indicate that the promotions made little difference. Companies like Saks (SKS) and JCPenny (JCP) reported worse-than-expected declines of 10.9% and 12.4%, respectively.

But despite the grim figures, Wal-Mart (WMT), the world's largest retailer actually saw its same-store sales increase 2.4%! And that's in light of a disappointing back-to-school shopping season and the temporary closure of 341 of its U.S. stores due to hurricanes. While many retailers continue to lower their earnings estimates for the quarter, this discount chain is clearly profiting from shoppers' economic blight.

Obviously, the collapse of the financial sector has spared none in its wake—including discounters. But Wal-Mart's U.S. president, Eduardo Castro-Wright, is confident that the company's strong "value proposition" will keep bringing more and more cash-strapped consumers to their stores.

The next hurdle that retail companies are gearing up for is the all-important holiday season, which is already forecast to be the worst in 17 years. Already, Wal-Mart is cutting prices on some of its most popular toys to get a jumpstart on holiday sales.

In general, analysts expect value-oriented stores to be the safest bets this season, and Wal-Mart is leading the pack. The company maintained its third-quarter profit forecast and expects its low-priced, high value merchandise to position it well into the holidays even as shoppers think twice about how to spend their money.

PortfolioGrader Pro gives Wal-Mart an A-grade. In fact, it's worth mentioning WMT's grade has risen steadily in the past year, while most other retailers have had their grades trend down. So if you're looking to invest in a fundamentally sound company that is thriving in this tough economic environment, Wal-Mart is a solid bet!

Do you own Wal-Mart? Would you buy retail in this current environment? Send us your comments!