Back to top

Image: Bigstock

Walmart (WMT) Concludes Sale of Major Stake in UK-Based Asda

Read MoreHide Full Article

Walmart Inc. (WMT - Free Report) has long been focused on strengthening international operations by shifting focus from underperforming areas to areas with higher growth potential. Incidentally, the company unveiled that the U.K.-based tycoons, the Issa brothers (Mohsin and Zuber Issa), and TDR Capital have concluded the previously announced acquisition of a major stake in Walmart’s wholly-owned U.K. business, Asda. The deal was closed at an enterprise value of £6.8 billion, following which the company retains an equity investment in Asda.

Notably, Walmart has long been trying to sell stakes in Asda, which it had acquired more than 20 years ago to solidify international footprint. However, industry experts believe that Asda’s sales have been bearing the brunt of fierce competition from discount store chains like Aldi and Lidi. In fact, there were talks of Walmart trying to merge Asda with J Sainsbury (JSAIY - Free Report) in 2018, which didn’t materialize due to regulatory hurdles.

Certainly, Walmart has been exploring options for Asda since then, as part of its efforts to focus on areas with growth potential. Talking of areas with solid potential, the company’s buyout of a major stake in India’s e-commerce firm, Flipkart (in 2018), has been contributing to its International segment revenues. Evidently, net sales in the Walmart International segment rose 1.3% to $29.6 billion in the last reported quarter. On a constant-currency basis, net sales grew 5% to $30.6 billion on the back of Walmex, Canada and Flipkart. Importantly, e-commerce sales had a contribution of 14% to total segment sales, courtesy of solid omnichannel capacities.

What Else Should You Know?

Talking of e-commerce, Walmart’s e-commerce business and omnichannel penetration have been increasing, all the more amid the pandemic-led social distancing. Management expects these trends to stay even after the current crisis dissipates. The company, on its third-quarter earnings call, said that it has doubled the U.S. store associate count this year, supporting the company’s digital and omnichannel efforts. Surely, Walmart’s combination of a robust store network and growing digital capacity is likely to keep it in good shape.

Walmart’s concerted endeavors to bolster e-commerce operations, mainly by improving delivery services, have been helping the omnichannel retailer make the most of the rising demand opportunity amid the pandemic. In this regard, the company’s launches of the Walmart+ membership program; drone delivery pilots in the United States with Flytrex, Zipline and DroneUp; and a pilot with Cruise to test grocery delivery through self-driven all-electric cars are noteworthy moves. Apart from these, Walmart unveiled an alliance with Door Dash in the third quarter of fiscal 2021 to deliver prescriptions from pharmacies of Sam’s Club, alongside expanding Scan & Go to all fuel stations at U.S. Sam’s Clubs. Prior to this, the company unveiled Express Delivery during the first quarter at several stores, which helps it deliver orders to customers in less than two hours.

Walmart has been taking several other e-commerce initiatives as well. During the third quarter, the company unveiled an additional investment in India’s Ninjacart, for technology and supply-chain solutions. Additionally, the company’s contracts with Goldman Sachs (GS - Free Report) and Shopify (SHOP - Free Report) , among others, and buyouts of ShoeBuy, Moosejaw and Bonobos, to name a few, are noteworthy.

We believe that such upsides, together with a focus on improving operations by increasing focus on high-potential areas, are likely to keep this Zacks Rank #3 (Hold) company going. Shares of this supermarket giant have rallied 21.8% in a year compared with the industry’s rise of 21.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Legal Marijuana: An Investor’s Dream

Imagine getting in early on a young industry primed to skyrocket from $17.7 billion in 2019 to an expected $73.6 billion by 2027.  

Although marijuana stocks did better as the pandemic took hold than the market as a whole, they’ve been pushed down. This is exactly the right time to get in on selected strong companies at a fraction of their value before COVID struck. Zacks’ Special Report, Marijuana Moneymakers, reveals 10 exciting tickers for urgent consideration.

Download Marijuana Moneymakers FREE >>

Published in