Walmart’s Mixed Bag: Adding Up Fiscal 2018
Walmart to benefit from its strategic initiatives
Wal-Mart Stores (WMT) is likely to benefit from the strategic investments it has made over the past couple of years to overhaul its operations—investments that have included integrating its operations with technology to offer a multi-channel shopping experience to its customers. The company has remained successful in driving store sales, as reflected in the rise in store traffic.
Meanwhile, Walmart’s e-commerce business is witnessing strong sales, driven by ramped up e-commerce initiatives including the expansion of online grocery, store pick up, and direct-to-home offerings.
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The chart above shows the YTD (year-to-date) performance of Walmart stock, which has risen 2.1% as of March 15. Except for Costco Wholesale (COST), most of Walmart’s peers are reeling under pressure from increased competition from Amazon.com (AMZN), currency headwinds, and commodity deflation.
Target (TGT) remains the worst performer among the lot, with its share price dropping by more than 24% on a YTD basis. Notably, Walmart makes up 5.5% of the Consumer Staples Select Sector SPDR ETF (XLP). XLP has risen 7% since the start of 2017.
Walmart’s strategy to drive traffic
Walmart will continue to invest in stores by remodeling and integrating them with technology to enhance consumers shopping experience and drive traffic. Moreover, the company plans to open fewer new stores and thereby cut expenses. Walmart has also been taking initiatives to improve store sales through training its workforce and raising wages.
Meanwhile, the company’s improved and innovative product offerings—especially in the fresh segment—have been gaining traction among consumers, which will likely boost store sales. Other product categories, including hardlines, apparel, and health and wellness are generating healthy sales growth as well. On the technology front, Walmart has invested heavily in beefing up its online offerings to compete with Amazon.
What could impact growth
Walmart’s fiscal 2017 financial performance was largely under pressure due to adverse currency movements, commodity deflation, increased competition from e-commerce giant, Amazon, increased investment in price, and continued softness in the UK. These factors are not likely to abate in the near term and are expected to be a drag on the company’s financials going forward.
In this series, we’ll discuss Walmart’s financial performance in fiscal 2017 as well as the company’s e-commerce strategy to drive sales. We’ll also discuss the company’s segment performance, outlook, dividend history, analyst ratings, and current valuation.