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Here's Why Walmart (WMT) is Likely to Keep Its Solid Show On

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Walmart Inc. (WMT - Free Report) has managed to stay firm amid the competitive frenzy in the retail space, courtesy of its robust omnichannel efforts. Markedly, the company’s focus on strengthening its store and e-commerce operations has helped it put up a solid comparable store sales (comps) record in the past. Also, these efforts have enabled the company to counter the growing dominance of e-commerce giant, Amazon (AMZN - Free Report) .

Driven by these upsides, Walmart has rallied 15% in the past three months compared with the industry’s growth of 11.3%. Well, we believe that this Zacks Rank #2 (Buy) company is set to keep its splendid show going. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.



E-Commerce — a Key Catalyst


Walmart is trying every means to evolve with the changing consumer environment to compete with brick-and-mortar rivals and e-commerce king, Amazon. In this regard, the 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 Walmart’s digital capabilities. Apart from this, Walmart’s buyouts of ShoeBuy, Moosejaw, Bonobos, ModCloth and Jet.com, among others, underscore its quest to build an impressive digital brand portfolio. Additionally, Walmart is making aggressive efforts to expand in the booming online grocery space, which was a major contributor to its e-commerce revenues in the fourth quarter.

To this end, Walmart recently joined hands with Point Pickup, Skipcart, AxleHire and Roadie. These collaborations are expected to strengthen Walmart’s online grocery delivery service in four states, with plans of greater expansions, going ahead. Also, Walmart’s deal with Postmates and DoorDash along with its acquisition of Parcel highlight its focus on enhancing grocery sales. 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. We believe that these actions will help Walmart offer multiple choices to online grocery shoppers amid increasing competition from Amazon. Notably, grocery pickups can be now availed at more than 2,100 locations, with delivery available in roughly 800 locations. Backed by such endeavors, U.S. e-commerce sales surged 43% (in line with the growth recorded in the third quarter). Management is encouraged about achieving 35% U.S. e-commerce sales growth in fiscal 2020.

Solid Efforts to Enhance International Business

Walmart is committed toward achieving growth across all its markets, on the back of fresh products, and expansion of online grocery and private brands. During the fourth quarter of fiscal 2019, the company’s International segment net sales inched up 2.7% to $34 billion, with three (Mexico, Canada and U.K.) out of four largest markets registering positive comps. Notably, Walmart is making continued efforts to shift focus from underperforming areas to profitable regions like India and China. This is evident from the company’s decision to merge its soft U.K. grocery unit, Asda with Sainsbury (JSAIY - Free Report) and sell 80% of its stake in the underperforming Brazilian business. Additionally, Walmart’s buyout of major stake in Flipkart will help the former expand its presence in India, which is one of the largest retail markets in the world. Markedly, Walmart International net sales are expected to grow approximately 5% on a constant-currency basis in fiscal 2020.

Splendid Comps Record — a Driver

Walmart has been making 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 it draw customers. Well, such trends along with the aforementioned drivers fueled the company in fourth-quarter fiscal 2019, wherein both earnings and revenues improved year over year and the latter beat the Zacks Consensus Estimate for the fourth straight time. Notably, this marked Walmart’s 18th consecutive quarter of U.S. comps growth. U.S. comps, excluding fuel, improved 4.2%, backed by 0.9% rise in traffic and 3.3% in ticket.

Management is encouraged about the rosy U.S. economic scenario, and focused on boosting innovations and leveraging technology. Considering all factors, the company anticipates consolidated net sales to rise at least 3% in fiscal 2020. U.S. comps are expected to advance 2.5-3% (excluding fuel). Comps at Sam’s Club are likely to grow roughly 1%, excluding fuel, and nearly 3%, excluding tobacco fuel.

Clearly, these factors keep Walmart well positioned, making it a promising investment pick.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

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Amazon.com, Inc. (AMZN) - free report >>

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