What Walmart’s Report Says for Retail Stocks
Shares of Walmart (WMT) on Thursday showed the most significant daily gain since September 1, 2020, amid the announcement of record sales for the holiday quarter, as well as a more optimistic than expected forecast mean for the prospects of Walmart, as well as companies in the industry: Target, Costco and others?
Walmart shares, significantly lagging behind the market growth in 2021, but showing a smaller decline since the beginning of 2022, jumped 4% on Thursday after the report for the 4th holiday quarter.
Walmart shares are down 4% beginning of the year, barely risen in the last 12 months, while the S&P 500 index almost 12% previous 12 months and is down 8.1% since the beginning of 2022.
Walmart’s report showed record sales revenue and more substantial earnings than market analysts expected. Quarterly revenue and profit statistics on the Walmart reports page.
Walmart also increased its dividend by $0.01 to $0.56 per share while simultaneously planning to buy back its shares for $10 billion in the fiscal year 2023 (ends 01/31/2023).
Conclusions for investors based on the results of the Walmart report
An important conclusion of the Walmart report for investors was that due to its scale (Walmart has the largest supermarket chain in the United States), it managed to achieve lower prices from its suppliers and manufacturers, which compensated for the negative impact of inflation in the United States.
The report showed that Walmart is successfully coping with problems in supply chains, offsetting rising prices for consumers and the company’s ongoing costs related to Covid-19 and the increase in employee salaries.
Walmart reported that supply chain costs in the holiday quarter were $400 million higher than planned, and Covid-related prices were $300 million more than expected.
The Walmart report speaks of solid prospects for both its business and the valuation of its shares. In addition, market analysts say Walmart has a large “financial cushion” to cover inflationary costs while keeping prices low.
It will be more challenging to compete with this giant regarding inflation. In addition, investors’ expectations regarding the financial and forward-looking statements of retailers that have not yet reported earnings may be higher against the background of the Walmart report.
Smaller retail chains may suffer more from increased purchase prices; besides, they lag in the “digital race.”
In recent years, Walmart has been actively developing its electronic sales and delivery business, offering a service based on a Walmart+ subscription. As a result, Walmart’s e-commerce sales in the U.S. increased by 90% for the entire 2022 fiscal year.
The latest data from digital marketing firm Chicory, nearly three-quarters of U.S. shoppers have ordered products online in the last 90 days preferred online grocery shopping at Walmart, significantly ahead of competitors, including Amazon (AMZN). Traditional networks did not make the top five.
Apart from retail, Walmart’s relatively young global advertising business has already exceeded $2 billion. Annual income.
Major competitor Target (TGT), due to report its results for the holiday quarter on March 1, should also benefit from reduced quarantine restrictions and more shoppers in stores. However, Target’s stock may decline if the company’s quarterly results or forecasts are not as strong as Walmart’s. The same will probably be true for Kroger (K.R.), Costco, and others.
BMO Capital Markets analyst Kelly Bania believes that Walmart and Costco Wholesale (COST) stocks are the best choices for investing in food retailing and singles out Target and Dollar General (DG).
