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4 Reasons Why Walmart (WMT) Appears to Be a Solid Pick Now

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Walmart Inc. (WMT - Free Report) has been a preferred investment pick, thanks to the company’s robust efforts to enhance both store and e-commerce businesses. The company has been making concerted efforts to keep pace with consumers’ evolving shopping patterns and stay firm against Amazon (AMZN - Free Report) .

These factors have been driving this Zacks Rank #2 (Buy) stock that has gained 11% in the past six months, while the industry rallied 10.3%. Let’s delve deeper. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.



 

Splendid E-Commerce Strategies

Walmart company has been taking several e-commerce initiatives, including buyouts, alliances, and improved delivery and payment systems. To this end, the company’s partnership with Microsoft (MSFT - Free Report) is likely to strengthen its digital capabilities. Also, Walmart concluded the buyout of 77% stake in Flipkart, which is now included as part of the company’s results.

Apart from this, Walmart’s buyouts of ShoeBuy, Moosejaw, Bonobos, ModCloth and Jet.com, and deals with Rakuten, and Lord and Taylor underscore its quest to build an impressive digital brand portfolio. The company’s plans to venture into the subscription-based video streaming arena, improve its website, conclude the deal with PayPal, launch Bonobos and Nike (NKE - Free Report) on Jet.com, enhance check-out process, and focus on Walmart2World money transfer service along with Walmart Pay mobile payment system and Mobile Express Returns program further highlight the company’s initiatives to accelerate online business.

Backed by such endeavors, U.S. e-commerce sales surged 43%. These factors keep management encouraged about achieving 40% U.S. e-commerce sales growth in fiscal 2019.

Focus on Online Grocery a Key Driver

Walmart is making aggressive efforts to expand in the booming online grocery space, which was a major contributor to its e-commerce sales in the third quarter. Given the rising demand for online grocery, Walmart is committed to enrich consumers’ experiences by providing easy shopping methods and seamless grocery deliveries.

To this end, Walmart’s alliance with Jet.com and Blue Apron to provide on-demand meal kits is noteworthy. Also, Walmart recently raised its stake in Dada-JD Daojia to 10% to strengthen its last-mile delivery service. In an earlier development, Walmart inked a deal with Postmates to extend its online grocery delivery service to cover more than 40% of the families in the United States.

Other than this, the company’s contract with DoorDash and the acquisition of Parcel Inc. highlight its focus on enhancing grocery sales. Further, the company’s Walmart Pickup program enables customers to place orders online and then pick them up at a store for free.

In earlier developments, Walmart also partnered with ride hailing services Uber and Lyft for speedy online grocery deliveries, while it also tested same-day delivery with Deliv, in a bid to enhance its services further. Notably, grocery pickups can be now availed at 2,100 locations with delivery available in roughly 600 locations.

Efforts to Enhance International Business

Walmart’s International business has solid potential. During the third quarter, International segment sales inched up 1.6% to $30 billion on a currency-neutral basis, with nine out of ten markets registering positive comps. Walmex continued with its solid momentum, driven by favorable consumer demand, convenient pick-up process and digital efforts.

Results in China also remained impressive, courtesy of robust omni-channel capacities. Further, pricing drove comps in the U.K., while Canada also witnessed higher comps, thanks to favorable pricing, solid results in the food space and strong e-commerce sales.

The company is committed toward achieving growth across all its markets, on the back of fresh products, and expansion of online grocery and private brands. Also, Walmart is likely to gain from its steps to shift focus from underperforming areas to profitable regions like India and China.

This is clear from the company’s decision to merge its soft U.K. grocery unit, Asda with Sainsbury (JSAIY - Free Report) and sale of 80% of its stake in the underperforming Brazilian business. The company also acquired majority stake in India’s leading e-commerce name, Flipkart, which will help Walmart expand its presence in one of the largest retail markets in the world.

Sturdy Comps Run

The aforementioned growth drivers along with strong endeavors to enrich stores experience have helped Walmart put up a superb comparable store sales (comps) record. Walmart has been undertaking several efforts to enhance merchandise assortments.

Also, the company is on track with store remodeling, in an attempt to upgrade them with advanced in-store and digital innovations. Walmart is also gaining from its compelling pricing strategy, which helps the company draw customers. Such trends drove the company in third-quarter fiscal 2019, which marked Walmart’s 17th consecutive quarter of positive U.S. comps growth.

U.S. comps (excluding fuel) improved 3.4% on the back of a 1.2% rise in traffic and 2.2% in ticket. Management remains encouraged about the U.S. economic scenario, and is focused on boosting innovations and leveraging technology. Buoyed by such upsides, U.S. comps are now anticipated to grow at least 3% (excluding fuel) in fiscal 2019.

Clearly, Walmart has all it takes to catch investors’ eyes and is set to keep the show going.

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