Opportunity in Wal-Mart?

After reviewing wide-moat

We believe that Wal-Mart’s shares declined 3% after earnings because investors are struggling to reconcile positive sales growth trends with the level of investment needed to sustain such growth. On the positive side, Wal-Mart U.S.' comparable-store sales increased 1.5% (traffic up 1.3%) and Sam’s Club’s increased 1.3% (traffic up 0.5%). Moreover, Wal-Mart’s Neighborhood market also continued to perform well (comp growth of 7.3%). Wal-Mart’s international division reported 2.8% currency-neutral sales growth, with the firm taking market share in Mexico, China, and Brazil despite challenges in some of these markets. These results suggest that investments are helping drive growth.

Despite positive sales growth, operating margin contracted 60 basis points to 4.5%, as Wal-Mart continues to invest heavily in labor and e-commerce. About $0.17 per share of the incremental cost headwinds can be attributed to higher-than-expected labor hours ($0.04 incremental), pharmacy and shrink ($0.11), and foreign exchange ($0.02); however, management hasn’t explicitly called out the remaining $0.16 incremental headwind, which we believe could reflect competitive countermeasures, softer global macro trends, and management conservatism.

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