Wal-Mart Stores Inc (NYSE:WMT) announced a $15 billion share repurchare and emphasized a recent dividend hike to hearten shareholders who have seen the stock lag as its U.S. sales remain in a prolonged slump.
The share buyback, disclosed at the retailer's annual meeting on Friday, replaces an identical one announced at the annual meeting a year ago, of which about $13 billion has been used. The new buyback amount equals roughly 8 percent of the company's market capitalization of $189 billion.
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Wal-Mart is looking for sales in all the places consumers shop -- online, stores large and small, and international markets like Africa -- since the company has suffered two years of declining sales at existing U.S. stores.
Executives say that fixing the U.S. business is taking too long. Walmart U.S. Chief Executive Bill Simon told reporters on Thursday about his "impatience with the pace of change" at his stores, which have lost bargain-seeking customers to dollar stores.
"While we have a long way to go, we're on the right track," Simon said at Friday's annual meeting, which doubles as celebrity-infused pep rally for about 14,000 employees and was hosted this year by Hollywood actor Will Smith.
Wal-Mart shares were off 2 cents at $53.53 in late-morning trade.
"We don't think people should be buying into the stock now," said Edward Jones analyst Matt Arnold. But if an investor already owns the stock, he can hold onto it and wait for the economy to improve enough to give Wal-Mart's core customer a chance to recover, he said.
Friday's U.S. employment report is going to make Wal-Mart's job in its home market even more difficult. The U.S. jobless rate rose to 9.1 percent from 9 percent; economists had expec ted a drop to 8.9 percent.
The core low and middle-income shoppers who visit Walmart stores are feeling the impact of higher gasoline and food prices. While the company is trying to work with suppliers to keep a lid on its prices, some items, such as jeans, are now more expensive after a commodities rally pushed up costs in 2010.
TRYING TO REIGNITE THE U.S. BUSINESS
Wal-Mart shares have underperformed the larger market. Through Thursday, the stock was up 6.3 percent since the 2010 annual meeting, well below the 23.3 percent increase in the Standard & Poor's 500 index over the same period.
In March Wal-Mart raised its annual dividend to $1.46 a share from $1.21.
"That's a reflection of the strong financial performance of your company," Chief Financial Officer Charles Holley told the annual meeting.
While business at the smaller international and Sam's Club units has largely hummed along, Wal-Mart is still recovering from missteps, such as removing some items from its U.S. discount stores and focusing on short-term deals rather than everyday low prices. It has been bringing back items, first in food and other consumables, and has gone back to emphasizing low prices to more effectively compete with dollar stores.
"We're not playing the high-low game and our customers are responding." Simon said.
Wal-Mart's annual meeting is attended by investors and Wall Street analysts but is largely a staged showcase to energize the company's employees, known as associates.
Associates came from across the United States, Canada, China and other countries to attend the meeting. They pack hotels and even stay in dormitories at the University of Arkansas.
Chinese associates lined up at Wal-Mart's home office in nearby Bentonville this week just to take a picture with a wall mural that shows "Mr. Sam," the company's founder, Sam Walton. Also joining the fray this year are some Massmart Holdings Ltd employees, now that Wal-Mart's purchase of a majority stake in the South African chain has been approved.
Massmart Chairman Mark Lamberti and CEO Grant Pattison were introduced to the crowd packed into the Bud Walton arena on the university campus Friday morning.
While vuvuzelas played from the South Africa part of the crowd, the biggest noise early in the morning came from thousands who cheered when Smith, who called himself "Will-Mart," was introduced as the emcee.
The big question on most minds is whether U.S. strategies, including bringing back more merchandise and opening smaller Walmart Express stores, will work.
"Over time, if the lower-income consumer comes back, that's a powerful tide that should move the stock higher," Arnold said.
The Walmart Express format -- modeled after smaller stores operated outside the United States -- debuts in rural Gentry, Arkansas, this weekend. Stores in North Carolina and Chicago will follow later this year.