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Splitting hairs.

As Wal-Mart Stock Hovers Near 60, Investors Wonder Why It Didn't Split; Analysts Say It's No Big Deal

When a stock split was not announced by officials of Wal-Mart Stores Inc. at the Bentonville-based company's annual meeting in Fayetteville last June, analysts and stockholders were surprised.

It seemed like a done deal.

Wal-Mart's stock traditionally has split when shares hit the 50-70 range. The stock was worth 53 1/4 last June 1.

Also, the splits usually occur about every two years. Last June would have been exactly two years since the last split.

"It didn't happen and as a result of that there were a lot of Wal-Mart investors who were disappointed," says John Barnes, an analyst with the Little Rock office of Shearson Lehman Brothers Inc.

So, stockholders began to wonder.

Did the death of Wal-Mart founder Sam Walton last April adversely affect the company's stock?

Were the retail market and the general economy just that bad?

Analysts weren't as concerned as stockholders, even though most analysts thought a stock split last June was a 50-50 proposition.

A split is an increase in a corporations' number of outstanding shares of stock to make the stock more marketable without any change in the shareholders' equity or the aggregate market value at the time of the split.

In a split, the share price declines. Dividends per share also will fall proportionately.

"A lot of people make a big deal about |a split~, but I don't think it's that big a deal," says William Whyte, an analyst at Stephens Inc.

Whyte says a split usually helps the stock because there's more liquidity.

But, with 1.14 million shares, Wal-Mart has plenty of liquidity already. That's even with the Walton family owning 40 percent of the stock.

"The problem is people in this state are spoiled," says Bob Williams, an analyst at T.J. Raney & Sons, a division of Morgan Keegan & Co.

Williams agrees that it's a fallacy that stock splits are so important. He says of Wal-Mart's board, "They're going to split when they think it's appropriate."

William Dillard Sr., founder of the Little Rock-based Dillard Department Stores Inc., has been know to nix splitting the stock of his company simply because people were expecting it, one analyst says.

There isn't much speculation as to why the Wal-Mart board has held off.

"I wrestled with that one, and I haven't come up with a good reason," Barnes says. "I can't second-guess the board."

Wal-Mart spokesman Don Shinkle says a split takes place when one is warranted. There is not a set range when one may automatically occur.

Other Concerns

The absence of a split aside, there is other concern regarding Wal-Mart stock.

Although the stock started off strong at 59 1/8 in January, it dipped to a low of 51 3/8 in April and had remained stagnant in the low- to mid-50s.

It is now hovering in the 60 range.

This is the first time Wal-Mart's stock has remained so dramatically flat throughout a year.

"It's more related to market activity than anything fundamental about Wal-Mart itself," Whyte says.

Earnings are still on target for the company.

With an annual growth of 20 percent and same store sales growing at 10-11 percent annually, analysts predict this year's net profits to be in the 20-25 percent range.

Shinkle points out that the stock actually hit an all-time high -- if past splits are taken into account -- last Wednesday when it closed at 62.

As for the effect of Sam Walton's death, most agree that the founder left his company in good hands. Both David Glass, president and chief executive officer, and Donald Soderquist, vice chairman and chief operating officer, had been active in the day-to-day operations of Wal-Mart for more than a decade before Mister Sam died.

Chairman Rob Walton, Sam Walton's oldest son, has been the most active of the Walton family within the company. He has served as Wal-Mart senior vice president, general counsel and vice chairman. He took over as chairman when his father finally succumbed to cancer on April 5.

Analysts attribute the flat performance of Wal-Mart stock over the first two quarters of the year to the recession plaguing the retail industry. The third quarter was boosted by back-to-school promotions and the fourth quarter should be helped by Christmas sales.

"If the market recovers after the election and the retail stocks continue to do well as they have in the last couple of weeks, investors will expect a stock split by the next annual meeting in June of next year," Barnes says.
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Title Annotation:Wal-Mart Stores Inc. stock split
Author:Rengers, Carrie
Publication:Arkansas Business
Date:Oct 26, 1992
Previous Article:Little Rock's Choice.
Next Article:Alphabet soup.

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