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Walmart's (WMT) Omnichannel Strength Aids Amid a Tough Landscape
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Walmart Inc. (WMT - Free Report) remains firmly placed despite navigating a dynamic retail landscape stemming from challenges like inflation and volatile consumer spending. The supermarket giant’s diversified business, along with continued strength in store and digital operations, has been contributing to its success story. Walmart has also been gaining from higher-margin ventures, such as advertising.
Adding Leaves to the Growth Story
Walmart has been gaining from its sturdy comp sales, which are driven by its constant expansion efforts and splendid e-commerce performance. The company has been undertaking several efforts to enhance merchandise assortments. Also, it has been focused on store remodeling to upgrade them with advanced in-store and digital innovations. Walmart remodeled 233 U.S. stores in the third quarter. Walmart is also gaining from its compelling pricing strategy, which helps it draw customers.
The company’s e-commerce business and strong omnichannel penetration have been aiding growth. WMT has been taking several e-commerce initiatives, including buyouts, alliances and improved delivery and payment systems. E-commerce sales surged 15% globally on pickup and delivery in the third quarter of fiscal 2024 and formed 15% of WMT’s overall net sales. U.S. e-commerce sales rose 24%, driven by strength in pickup & delivery. At Sam’s Club, e-commerce sales jumped 16% on strong curbside and delivery.
Walmart has been innovating in the supply chain and adding capacity as well as building businesses such as Walmart GoLocal, Walmart Connect, Walmart Luminate, Walmart+ and Walmart Fulfillment Services. Other notable strides in the e-commerce realm include the buyout of a major stake in Flipkart, which has been bolstering its International segment. Walmart’s majority stake in India’s digital transaction platform, PhonePe, is also worth mentioning.
Additionally, the company has made aggressive efforts to expand in the booming online grocery space, which has long been a major contributor to e-commerce sales. Walmart has significantly bolstered its delivery capabilities, as exemplified by its Spark Driver platform, the partnership with Salesforce, the expansion of the InHome delivery service, investments in DroneUp and the Walmart+ membership program, among others.
Moreover, the company’s store and curbside pickup options add to customers’ convenience. As of the third quarter of fiscal 2024, Walmart U.S. had nearly 4,600 pickup locations and more than 4,200 same-day delivery stores.
Image Source: Zacks Investment Research
Current Obstacles
Customers have been displaying discretion in their spending patterns, choosing more affordable options to manage within their budget. In the third quarter of fiscal 2024, Walmart continued to bear category mix-related hurdles stemming from greater rates of grocery and health & wellness compared with general merchandise. Management expects the merchandise mix pressure to persist in the fourth quarter and be more pronounced due to the volatile consumer landscape.
An uneven sales pattern keeps management cautious about customers’ spending patterns. The company expects sales growth to moderate in the fourth quarter compared with the preceding quarters. Apart from this, Walmart has been witnessing a rise in product costs. Though disinflation across some pockets has been a breather, management is hopeful of witnessing better gains, especially in the dry grocery and consumables categories.
Looking Ahead
Walmart is likely to keep its growth story going due to its strength across segments, channels and formats. For fiscal 2024, the company expects consolidated net sales growth of 5-5.5% at constant currency or cc. Adjusted EPS is envisioned in the band of $6.40-$6.48 now, up from the adjusted EPS of $6.29 delivered in fiscal 2023.
Shares of the Zacks Rank #3 (Hold) company have risen 4.5% in the past six months compared with the industry’s growth of 3.5%.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales suggests growth of 15.1% from the year-ago reported number. ANF’s bottom line has outpaced the Zacks Consensus Estimate by a wide margin in the trailing four quarters, on average.
The Gap, Inc. (GPS - Free Report) , a fashion retailer of apparel and accessories, currently sports a Zacks Rank #1. GPS has a trailing four-quarter earnings surprise of 137.9%, on average.
The Zacks Consensus Estimate for Gap’s current financial year EPS indicates growth of 387.5% year over year.
American Eagle Outfitters (AEO - Free Report) , a retailer of casual apparel, accessories and footwear, currently has a Zacks Rank #2 (Buy). AEO delivered a trailing four-quarter average earnings surprise of 23%.
The Zacks Consensus Estimate for American Eagle Outfitters’ current financial year sales and EPS implies growth of 4.6% and 41.2%, respectively, from that reported a year ago.
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Walmart's (WMT) Omnichannel Strength Aids Amid a Tough Landscape
Walmart Inc. (WMT - Free Report) remains firmly placed despite navigating a dynamic retail landscape stemming from challenges like inflation and volatile consumer spending. The supermarket giant’s diversified business, along with continued strength in store and digital operations, has been contributing to its success story. Walmart has also been gaining from higher-margin ventures, such as advertising.
Adding Leaves to the Growth Story
Walmart has been gaining from its sturdy comp sales, which are driven by its constant expansion efforts and splendid e-commerce performance. The company has been undertaking several efforts to enhance merchandise assortments. Also, it has been focused on store remodeling to upgrade them with advanced in-store and digital innovations. Walmart remodeled 233 U.S. stores in the third quarter. Walmart is also gaining from its compelling pricing strategy, which helps it draw customers.
The company’s e-commerce business and strong omnichannel penetration have been aiding growth. WMT has been taking several e-commerce initiatives, including buyouts, alliances and improved delivery and payment systems. E-commerce sales surged 15% globally on pickup and delivery in the third quarter of fiscal 2024 and formed 15% of WMT’s overall net sales. U.S. e-commerce sales rose 24%, driven by strength in pickup & delivery. At Sam’s Club, e-commerce sales jumped 16% on strong curbside and delivery.
Walmart has been innovating in the supply chain and adding capacity as well as building businesses such as Walmart GoLocal, Walmart Connect, Walmart Luminate, Walmart+ and Walmart Fulfillment Services. Other notable strides in the e-commerce realm include the buyout of a major stake in Flipkart, which has been bolstering its International segment. Walmart’s majority stake in India’s digital transaction platform, PhonePe, is also worth mentioning.
Additionally, the company has made aggressive efforts to expand in the booming online grocery space, which has long been a major contributor to e-commerce sales. Walmart has significantly bolstered its delivery capabilities, as exemplified by its Spark Driver platform, the partnership with Salesforce, the expansion of the InHome delivery service, investments in DroneUp and the Walmart+ membership program, among others.
Moreover, the company’s store and curbside pickup options add to customers’ convenience. As of the third quarter of fiscal 2024, Walmart U.S. had nearly 4,600 pickup locations and more than 4,200 same-day delivery stores.
Image Source: Zacks Investment Research
Current Obstacles
Customers have been displaying discretion in their spending patterns, choosing more affordable options to manage within their budget. In the third quarter of fiscal 2024, Walmart continued to bear category mix-related hurdles stemming from greater rates of grocery and health & wellness compared with general merchandise. Management expects the merchandise mix pressure to persist in the fourth quarter and be more pronounced due to the volatile consumer landscape.
An uneven sales pattern keeps management cautious about customers’ spending patterns. The company expects sales growth to moderate in the fourth quarter compared with the preceding quarters. Apart from this, Walmart has been witnessing a rise in product costs. Though disinflation across some pockets has been a breather, management is hopeful of witnessing better gains, especially in the dry grocery and consumables categories.
Looking Ahead
Walmart is likely to keep its growth story going due to its strength across segments, channels and formats. For fiscal 2024, the company expects consolidated net sales growth of 5-5.5% at constant currency or cc. Adjusted EPS is envisioned in the band of $6.40-$6.48 now, up from the adjusted EPS of $6.29 delivered in fiscal 2023.
Shares of the Zacks Rank #3 (Hold) company have risen 4.5% in the past six months compared with the industry’s growth of 3.5%.
3 Promising Retail Picks
Abercrombie & Fitch (ANF - Free Report) , a specialty retailer, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales suggests growth of 15.1% from the year-ago reported number. ANF’s bottom line has outpaced the Zacks Consensus Estimate by a wide margin in the trailing four quarters, on average.
The Gap, Inc. (GPS - Free Report) , a fashion retailer of apparel and accessories, currently sports a Zacks Rank #1. GPS has a trailing four-quarter earnings surprise of 137.9%, on average.
The Zacks Consensus Estimate for Gap’s current financial year EPS indicates growth of 387.5% year over year.
American Eagle Outfitters (AEO - Free Report) , a retailer of casual apparel, accessories and footwear, currently has a Zacks Rank #2 (Buy). AEO delivered a trailing four-quarter average earnings surprise of 23%.
The Zacks Consensus Estimate for American Eagle Outfitters’ current financial year sales and EPS implies growth of 4.6% and 41.2%, respectively, from that reported a year ago.