Reuters reports that Wal-Mart Stores Inc.’s (WMT) annual holiday price-cutting may pressure rivals more than usual this year. Undoubtedly, this will be good news for shoppers and will make great theater for observers of the retail scene.

It’s likely just a sideshow for equity investors.

There are two broad strategies retailers use to bring in the money. One approach involves low-margins and, presumably, high turnover; in other words, sell cheaply but make up for it by moving stock quickly. The opposing strategy involves living with slower turnover in an effort to make more on each sale.

Financial theory is neutral on which strategy is better. Return on capital is what matters and one way or another that’s calculated with reference to margin and turnover. Companies can excel through either strategy. The weight of anecdotal experience seems neutral too. A stock can just as easily get hammered by news of excessive markdowns as it can by news of overstocked shelves.

Interestingly, a preliminary glance at data covering the past 12 months suggests neutrality may, indeed, be the right answer.

We looked at share price performance for 164 retailers in our database over the past year and did a quick fundamental comparison of companies whose shares outperformed the S&P 500 (the “better” group) versus those that underperformed (the “worse” group). This is not a back-test; in other words, we are not saying that shares of companies with such-and-such characteristics as of November 2005 were more/less likely to outperform in 2006. It’s a contemporaneous test: we compare 52-week share price performance since November 2005 with financial data that gradually came out over the same time span, thus measuring the extent to which share prices tracked fundamental trends as they unfolded.

The results are in Table A show average results for each group. (The conclusions would not change if we were to switch to median results instead.)

Table A

Data is for the trailing 12 month period.

It appears that the higher operating margins achieved by the better group mitigate against the low-price-high-volume strategy. But in truth, it’s not so clear. Price cutting would more likely be apparent in gross margins, where differences between the better and worse groups seem much less significant.

There isn’t much indication that investors care about how quickly goods fly off the shelves, either.We do see that the better group achieved stronger returns on investment, again supporting the view that investors will accept either strategy, as long as the company succeeds in its chosen course.

We do see that the better group achieved stronger returns on investment, again supporting the view that investors will accept either strategy, as long as the company succeeds in its chosen course.But before we go all out tipping our hats to the ivory-tower crowd, let’s check Table B.

Table B

Data is for the trailing 12 month period.

That’s a huge edge for the better group, so much so as to induce us to check median data, to guard against a small number of exceptionally large numbers. These results are in Table C.

Table C

Data is for the trailing 12 month period.

The sales impact is not replicated in reported earnings-per-share figures, but it’s possible that non-recurring items may be causing distortions. Meanwhile, the significance of sales growth is consistent with casual observation of the growth-momentum quality of recent market rallies.

Referring back to the last row of Table A, we’d like to believe capital efficiency counts. But Tables B and C raise questions.

In any case, Wal-Mart’s annual round of price wars are just as risky for the Bentonville giant as for rivals: If the next 12 months look anything like that past period, Wall Street will be looking at dollars, not necessarily foot traffic. Rivals should note that Wall Street will probably be looking at more closely at dollars than margins.

Bottom line for retailers: whatever the strategy, at the end of the day, just show the money.