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Wal-Mart (WMT) Surges on Buyback Plans and Upbeat Guidance

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On Tuesday, the market woke up to the news of Wal-Mart Stores' (WMT - Free Report) stock repurchase program of a staggering $20 billion, to be carried out in the next two years. Wal-Mart regularly returns value through higher dividends and share buybacks.

In fiscal 2017, the company returned a total of $14.5 billion to its shareholders through share repurchases and dividends. It bought back shares worth $8.3 billion. Wal-Mart has increased dividend for 44 consecutive years including the hike of 2% for fiscal 2018.

Further, the company reaffirmed its fiscal 2018 earnings guidance and continues to expect the same in the range of $4.30–$4.40. The company enticed investors by providing a positive outlook for fiscal 2019, wherein it expects earnings to grow 5%, thereby translating to adjusted earnings in the range of $4.52–$4.62. Driven by the sustained growth in comps and e-commerce, the company envisions sales to rise approximately 3% during fiscal 2019.

Consequently, shares of Wal-Mart rallied more than 4% on Oct 10, 2017, while finally closing at $84.13. Undoubtedly, this retail behemoth is leaving no stone unturned to continue boosting shareholder returns, along with the ramping up of e-commerce and delivery services.

Continuous Endeavors to Expand Online Presence

Wal-Mart has been relentlessly focusing on expanding its online business. Most recently, the company introduced easy and hassle free returns process for items purchased online. It has also announced free two-day shipping and in-store pick ups in close to 4,700 stores for online shoppers. The company plans to further add 1000 online grocery locations. It remains on track to improve delivery services for its e-commerce business and has recently acquired Parcel, Inc. In addition to expanding online grocery locations domestically, Wal-Mart is also focusing on expanding such services in key emerging markets and plans to add 255 units in China and Mexico.

Through its online arm Jet.com, Wal-Mart has announced plans to launch its own private-label brand, Uniquely J, targeting young urban adults. Since Jet.com’s acquisition in September 2016, the company has acquired four e-commerce businesses — Bonobos, ShoeBuy, Moosejaw, ModCloth.  The company also plans to invest in online cosmetics startup Birchbox. Wal-Mart has also teamed up with Google’s Alphabet Inc to enter the budding voice-shopping market, following the footsteps of Amazon.

Backed by the solid progress of Wal-Mart’s e-commerce business the company expects Wal-Mart US online sales revenue to account for 40% of net sales in fiscal 2019. It also anticipates capital expenditures of $11 billion each during fiscal 2018 and 2019 in connection with its online business expansion.

These efforts indicate Wal-Mart’s enthusiasm toward exploring and augmenting itself in the digital space and thereby offer a formidable fight to Amazon.com (AMZN - Free Report) for capturing retail market share. Similarly retailers like Target Corporation (TGT - Free Report) and Kohl’s Corporation (KSS - Free Report) are also focused on boosting omni-channel retailing and e-commerce. Expansion of Wal-Mart’s online business also compensates for the receding performance of brick-and-mortar stores. As a result, Wal-Mart plans to restrict store openings in the United States to lower than 15 Supercenters and 10 neighborhood markets, during fiscal 2019.  

This Zacks Rank #2 (Buy) company has constantly been an important pick for investors because of constant endeavors to expand its offering, while catering to the evolving needs of consumers. This is well reflected in the company’s share price performance that surged 24.7% in the past 12 months, compared with the industry’s increase of 12.5%. Further, the stock has a VGM Score of A, and a long-term growth rate of 5.9% indicating its inherent strength.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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