Kate DuBose Tomassi, 04.12.06, 8:02 AM ET
Goldman Sachs analyst Adrianne Shapira reiterated an "outperform" rating on Wal-Mart Stores shares after company meetings led her to believe the company is dealing with its sliding return on investment capital.
The analyst said her recent meetings with the company's chief financial officer further bolsters her conviction in management's efforts to stem sliding ROIC, which could lead to multiple expansion.
Wal-Mart thinks it can reverse the slide this year through margin expansion and inventory control, she said.
"Specifically, better store-shelf, back room, and distribution center space management will be a key focus over the next 12 to 24 months, especially for slower turning items," said the analyst.
Checks with key suppliers like Proctor & Gamble and logistical suppliers like transportation company YRC Worldwide indicate the company's cutting of excess inventory is already underway.
Moreover, key to driving margin expansion and increasing ROIC will be the company's continued global procurement, said the research analyst.
"The growing importance of this division was best exemplified by the recent appointment of Lawrence Jackson, a seasoned executive, to lead the group," she said.
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