Morgan Stanley Leaves Wal-Mart Lunch With 'Six Key Takeaways'

On Friday, Morgan Stanley analyst Simeon Gutman hosted a lunch with Wal-Mart Stores, Inc. WMT VP of Investor Relations. Carol Schumacher.

Gutman noted the themes were consistent with everything he heard a week ago in Kansas. However, he left we six key takeaways.

1. Capital allocation is on the top of investor's minds: Gutman suggested there are two types of investors. Type A wants the company to start behaving like a mature retailer, i.e., rein in capex spending and return more to shareholders. Type B accepts that the company is still looking to grow and are looking to better understand the near-term outlook.
2. Omni channel losses should peak next year (fiscal 2016): Gutman said lower investments and higher sales should drive improvement thereafter.
3. EBIT margin guided "flat to slight lower."
4. Wal-Mart is well prepared for the holiday season: The company's plan for operations mirror's that of last year. Additionally, Wal-Mart will invest in extra labor hours to stock shelves. The company plans to ramp General Merchandise price investments in the fourth quarter.
5. Savings Catcher is being extended to General Merchandise ahead of the holiday season: According to Gutman, this should increase Wal=Mart's already competitive pricing posture.
6. Second quarter dynamics of inflation in meat and produce and deflation in the center of the store are expected to continue for the second half.

Morgan Stanley currently rates Wal-Mart Overweight.