Wal-Mart and the Fashionista

AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

It's a blogger's dream come true, making the leap from fashion blogger to designing clothes for a global retailer. Lucky Los Angelena Shauna Miller got the dream gig after three years of wordsmithing for pennychic.com, her paean to Wal-Mart (NYSE: WMT) apparel and fashionable ways to wear them.

The best way to describe her blog is in her own words, "I came up with the idea to put America's cheapest discount department store on a pedestal and ditch the skinny models for me and my friends. Welcome to a movement I like to call Penny Chic." Note: her latest lookbook  features items from Target, H&M, Forever 21, and JC Penney. May I suggest she turn her talent to ailing retailer JC Penney and retitle it PenneyChic?

Miller has designed a line of five Little Black Dresses (LBD for short) for walmart.com to debut in February. They're actually very attractive and affordable at $20.00, made in the USA, and sized XS to XL. Miller has street cred, too, as she worked at the haute couture house of Emmanuel Ungaro in Paris.

Frankly, it's a shame Wal-Mart took this long to recognize one of the best things that ever fell in their lap after years of glumly looking on as rival Target (NYSE: TGT) has had successful designer collaborations (their 2011 Missoni clothes line sold out in store and online in hours.) This year Target partners up with Prabal Gurung ( very hot young designer) and Kate Young, stylist to stars like Natalie Portman and Michelle Williams.

Macy's has had celebrity hookups and its own lines of accessories and apparel for years. Even KMart, owned by Sears Holdings has gotten into the act with clothing collaborations with Maroon 5's Adam Levine, Nicky Minaj, and Selena Gomez.

But it all comes down to this:

Does This Move The Needle?

Wal-Mart, the world's biggest retailer with $447 billion in sales, can't possibly sell enough LBDs to impact earnings. It trades at a 14.24 P/E with a 2.30% yield. What it does signal is that Wal-Mart has finally cottoned onto its relevancy gap and need to update its e-commerce site in light of the online supremacy of Amazon.com (NASDAQ: AMZN) as well as Macy's and Target.

Shareholders of Wal-Mart are within their rights to ask what took them so long? Target has almost a decade headstart on fashion collaboration and savvy (but broke) fashionistas have been shopping there for years. Target isn't a global name but it is aggressively moving into Canada and Target and Macy's are both in the "localization" game meaning merchandise is directed to locations that want it (as shown by careful study of sales numbers).

Target has been "targeting" customers for some time sending relevant offers and coupons to patrons they've identified as going through major life events, like graduation, childbirth, and marriage. Target has also pioneered "shoppable videos" and their commercials are iconic, graphic, and entertaining.

I have preferred Target to Wal-Mart as a stock and a shopping experience not just because of the whole socially responsible investing mishigoss but Target has low corporate governance risks in all four categories, board, audit, compensation, and shareholder rights. To be fair, Wal-Mart was named #2 of the 25 Most Inspiring Companies and Target #3 by Atlanta consulting firm, Performance Inspired. Target is a more creative company even within Big Box confines and with a lower P/E of 13.64 and same yield as Wal-Mart why not go with a company that has more room for expansion and growth with only 1,782 US stores?

Analysts expect 11.70% five year growth (YOY) and have a price target of $71.00 for 15% upside, not too shabby chic. Finally, something else that Target's doing better than Wal-Mart is Target's multi-year initiative to build urban Targets carrying apartment sized merchandise as well as more convenience style groceries. Located in urban historic buildings they'll be multi-level, not big boxes, to fit in with their neighborhoods. CityTargets in Chicago, LA, and Seattle already opened last July and are half the size of a SuperTarget (c.175,000 sq.ft). Wal-Mart Express stores are smaller and carry mainly groceries.

It has to be mentioned that this year's Target holiday designer collection was not as successful as hoped. In the last earnings report of November 15, CEO Gregg Steinhafel clearly expected better things only to see markdowns. Still, the company repurchased shares worth $1.25 billion in the first 9 months of 2012 and paid out dividends of $635 million.

Attention must be paid to Amazon, a threat to both retailers with the "showrooming" effect and both Target and Wal-Mart will not carry Amazon products. Fair enough but investors may still want to look at Amazon despite the enormous P/E (3239.52 as of January 21) as it simply does e-commerce better than anyone and Target and Wal-Mart lag far behind the tech giant. Analysts expect better five year earnings growth (yoy) than both retailers at 32.60%. Amazon reports January 29.

Happy Bloggers Everywhere

Kudos, Ms. Miller! Bloggers everywhere are heartened (but greeneyed) at your success. If Wal-Mart is finally checking out the blogosphere then we've arrived. While food companies and fashion companies have been courting mommy bloggers and fashion bloggers for some time Wal-Mart has joined the 21st century of the web at last. That said, Amazon is one of my favorite companies and I far prefer Target to Wal-Mart but I just might have to check out Miller's little peplum black dress.

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