Thursday’s Market Recap: Retailers Report Earnings

The market was up Thursday on strong investor sentiment, as the S&P (^GSPC) was closed up 1.04%.  The Dow (^DJI) was up 0.56% to close at 8331.32, while the NASDAQ (^IXIC)  followed suit up 1.50% to close at 1689.21.  Gold and crude both had up days as the two futures settled at $928.40 and $58.62 respectively.  The 10-year saw prices rise, as the yield fell to 3.092%.

Wal-Mart (WMT) reported earnings of $3.02 billion, or $0.77 per share, increasing earnings from $0.76 per share from the same quarter the previous year.  Revenue fell from $94.9 billion the year before to $94.2 billion, missing the street’s estimate of $95.1 billion, as a strong dollar hurt overseas sales.  Wal-Mart has fared well in the economic downturn, as many price-conscious consumers are shifting to Wal-Mart.  Wal-Mart has seen increased consumer spending at its stores from family’s whose income is over $50,000.  CEO Michael Duke is very optimistic about the future for Wal-Mart, as he says that the consumer shift to Wal-Mart stores is not temporary, but long term.  This is due to the fact that shopping at Wal-Mart is easier with a larger variety of products and more consumer friendly stores, this fact is  evident as sales in Wal-Mart U.S. chain stores rising 3.8%.  Wal-Mart is forecasting second quarter profits to be between $0.83 and $0.88 per share.

In other earnings news, Kohl’s (KSS) reported a profit of $137 million, or $0.45 per share as the company did a better job at managing inventory and expenses in the first quarter, with its gross margin improving to 37.6%.  Sales rose 0.4% to $3.64 billion as Kohl’s exclusives and private label brands increased their contribution to sales, raising the total to 44%.   Many believe Kohl’s is the best department store moving forward, especially compared to rival Macy’s (M), as it reported a loss of $88 million Wednesday due to declining sales.  Kohl’s CEO Kevin Mansell, is focused on the long run as he wants to improve in-store technology to enhance the in store experience for consumers and further itself from its rivals.  Kohl’s is forecasting earnings between $0.56 and $0.64 per share and between $2.19 to $2.42 for the year.

American international Group (AIG) plans on selling its Taiwanese life insurance unit, Nan Shan Life Insurance Co., in an effort to repay part of the $173 billion government bailout of AIG.  Nan Shan is the number two life insurer by premiums and had a reported book value of $2.64 billion at the end of March.  It has also been reported that AIG is planning a 2010 initial public offering of its Asian life insurance arm.  The potential IPO could raise $5 billion by fairly conservative estimates.  The offering is far from certain as it depends heavily on market conditions, but is something that AIG is looking at.  AIG has been hit hard, as public opinion in regards to the US government bailout has had a negative effect on the company, in the US and abroad.

Disclosure: The Fund the author is associated with is long WMT.

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