Wal-Mart Stays Stingy On Discounting, Still On Target For $66 Stock Price

Prices are low but no lower than usual

Wal-Mart seems to be adopting a mixed approach to drive holiday sales instead of just purely discounting all the products to drive store volumes.

While this signals the retailer’s increased confidence for holiday shopping, it also represents a broader development that the U.S. consumer might finally be growing more confident with regard to economic outlook. ?This should also benefit other retailers that compete with Wal-Mart like Costco, Target and Sears.

This bodes well for Wal-Mart as we maintain our bullish take on the company driven by expected improvements in sales metrics (like revenue per square foot) and stable profit margins. Our price estimate for Wal-Mart’s stock currently stands at $65.42, which is about 22% above current market price.

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Retracting Some Initial Price Rollbacks ?

While the economic growth has been sluggish in 2010, there were indications that the fourth quarter might be stronger than expected from early reports. October data suggested that due to payroll increases and improved employment, the 4th quarter would be strong. ^[]

Then November retail sales data released last week prompted economists to boost their forecasts even further. ^[]With confirmation that consumers are willing to spend this holiday, Wal-Mart decided to ease up on its initial price rollbacks on many items. We believe this will help support margins as the retailer can drive sales without heavily discounting.

Smartphone Discounts Could be Strategic

Wal-Mart is maintaining its discounts on smartphones like Apple’s iPhone 4. ^[] Given that smartphones are some of the hottest selling items this holiday season and Wal-Mart wants to both attract customers and improve its sales metrics like revenue per square foot, this strategy makes sense. The retailer is increasingly moving into selling consumer electronics – a topic we discussed in a recent article Will Best Buy?s Earnings Miss Weigh on Wal-Mart? – and is one of the key beneficiaries of Best Buy’s recent stumbles in its holiday sales push.

As we enter the home stretch on holiday sales, we expect to see some strong numbers out of Wal-Mart.

You can see the complete $65.42 Trefis price estimate for Wal-Mart’s stock here.

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Coalition intact: Govt safe as MQM stays – for now

Marathon MQM meeting decides to give PPP 10 days to distance itself from home minister’s comments; MQM delegation to meet PM on Sunday.

KARACHI:?Though apprehensions would have been calmed by the presence of the MQM’s ministers during a federal cabinet meeting earlier in the day, Wednesday evening’s emergency meeting of the PPP’s largest coalition partner in terms of seats would have had a few pulses racing in the top offices of the country.

The situation, however, was controlled – at least for now – by a hectic effort by the Pakistan Peoples Party’s leadership to assuage the MQM – which included an assurance that the president had had a word with Sindh minister Zulfikar Mirza. Though staying put for now, the situation will be “reassessed” by the MQM post-Ashura.

The Muttahida Qaumi Movement (MQM) held a marathon meeting of its Rabita Committees in London and Karachi that was meant to discuss “all possible options” available to the party in the wake of the latest verbal attack launched on them by Sindh Minister Zulfikar Mirza. Mirza, aside from blaming Karachi’s business community of supporting ‘terrorist elements’, had on Monday also accused the MQM of spearheading target killings in the city.

The MQM’s meeting on Wednesday therefore had some fearing a pullout from the PPP-led coalition – a move that would have ended the coalition’s official numerical majority in the Parliament. ‘Official’, because the PPP has apparently secured the ?support of the PML-Q’s 50-plus seats.

However, the worst-case scenario never materialised. The MQM’s Raza Haider, who is the Sindh IT minister, holding a press conference after the marathon meeting announced that the MQM respected differences of opinion, and would not play the part of destabiliser for the government – particularly during the sensitive period of Muharram.

There was a soft ultimatum. He said that the MQM would give the PPP 10 days to distance itself from the accusations of the Sindh home minister. The expansive time period also indicated a relaxation in the situation. MQM spokesman, Sindh Youth Affairs Minister Faisal Subzwari, however, says that the party will reassess its options after Muharram.

Yet, the buildup to the Wed-nes-day meeting was frantic.

High level contacts were made by the PPP in regards to the situation to assuage the MQM.

First, Sindh Chief Minister Qaim Ali Shah called on Sindh Governor Ishratul Ebad at the Governor House. During the meeting the difference between the two parties was discussed, according to an official statement. Another official contact was made by the president’s crisis man, Interior Minister Rehman Malik, who called the MQM’s central office in London.

However, most tellingly, quarters privy to the situation also informed The Express Tribune that Federal Information Minister Qamar Zaman Kaira actually assured the top leadership of the MQM that President Asif Ali Zardari had a stern word with the Sindh home minister over his statements regarding the MQM.

Leaders of the MQM will also meet Prime Minister Yousaf Raza Gilani on Sunday (December 19) to discuss the issue.

For all the hype, the MQM-PPP coalition stays intact – for now.

Published in The Express Tribune, December 16^th, 2010.

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