Citigroup (NYSE:C) Analyst Upgrades Wal-Mart (NYSE:WMT) on Food Discounts, Apparel Strategy

Citigroup (NYSE:C) analyst Deborah Weinswig gave Wal-Mart (NYSE:WMT) a boost today as she upgraded the stock based on further grocery discounts and their continual pursuit of wealthier customers with their apparel department and changes in store design.

Weinswig had a former hold on the company, but now has upgraded it to a buy, with a price target of $65 a share, up from her $54 she had been looking for.

With cost cutting on everyone's mind during the recession, Wal-Mart did something they had been struggling to do for years: attract a higher-end customer. While they continue to shop the store in the midst of the ongoing recession, things seem to be gradually changing, and as they feel a little more comfortable with their financial situations, are gravitating back to some of their past shopping haunts; something Wal-Mart is attempting to stop from picking up steam.

The grocery strategy for Wal-Mart is an obvious one, and something their competitors have never been able to match, and probably will never be able to; although they do give them a pretty good run for their money, especially with the power shoppers who pay attention to prices on individual items from store-to-store, which Wal-Mart isn't always the price leader on.

Wal-Mart has the heft behind it to win the grocery pricing wars though, and while their competitors must stay close, they won't be able to compete with overall prices, although they will continue to offer enough product items below Wal-Mart to keep people coming back to their stores because of what is perceived as a better experience.

Other strategies to retain wealthier customers has been to keep their aisles emptier and to expand them. Catering to their base customer demands the store to carry a large number of products and to fill every nook and cranny with them. To serve a higher-end clientele, they would have to offer more room to move and a less sense of clutter. They've already implemented those changes in their stores at this time.

Finally, and the thing I get the least excited about is their continued obsession with offering brand-name quality apparel. They've tried this and failed miserably in the past, yet the continue to pursue it.

While that's to be commended, it'll be a long-time project if it's ever to succeed; but the rewards would be great if they could get a nice increase in their current dismal market share in the sector.

To me Wal-Mart should almost always be on a "buy" rating, as their past history has shown how good they are at what they do. Taking into consideration more discounting, which could pressure the profits of the company, and to upgrade the rating based on retaining wealthier customers, is really not that great of a reason to do it. The wealthier customer thing is really a complete guessing game at this time, and it's one of the areas Wal-Mart isn't good at, and hasn't proved they are able to do.

Wal-Mart is a good investment on who they are, as they are, not because they're trying to expand their base beyond their core customer, which they not be able to do.