Wal-Mart Rocks on May Sales

Wal-Mart Stores (WMT, $59.77, up $2.09) is hitting 52-week highs today after reporting same-store sales were up 3.9% (not including fuel). Wall Street had expected the company to post a 1.6% gain. When you throw in gas sales, same-store sales rose 4.4% for Wal-Mart. Total sales were up nearly 10% to $31 billion.

This was certainly great news and looking ahead Wal-Mart is expecting June same-store sales to come in between 2%-4%. It’s no surprise that sales at Wal-Mart outperformed its competitors in May as the company is taking full advantage of the federal tax refunds that consumers are spending. Target (TGT, $54.92, up $0.72) on the other hand reported a 0.7% decline in comparable sales.

Once again Wal-Mart is pushing $60 and today’s high of $59.90 shows just how big of a barrier this is for the stock. I don’t get it. The company beat 1Q earnings expectations and is performing well in its current quarter but for some reason, Wal-Mart cannot get over $60. Maybe we will get it before the day is out or later in the week.

Wal-Mart is actually at a four-year high and needless to say the action in the June 60 calls (WMTFL, $0.88, up $0.69) is heavy. So far, over 16,500 contracts have traded. The payout for those of you who bought these calls yesterday at 20 cents knowing that Wal-Mart might outperform it peers today is 340%.

Rick Rouse
Rick@OptionsMentoring.com

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