Will Walmart Stock Bounce Back in 2019?



WMT stock performance in 2018

Walmart (WMT) shares underperformed its peers in 2018. Pressure on Walmart’s margins from the Flipkart deal and higher fulfillment costs remained a drag. Walmart stock fell 5.7% in 2018. In comparison, Costco (COST) and Target (TGT) shares increased 9.5% and 1.3%, respectively. Kroger (KR) stock remained roughly flat.

The S&P 500 Index fell 6.2% in 2018. The Consumer Staples Select Sector SPDR Fund (XLP) decreased 10.7%, which reflected weakness in the stock prices of packaged food, tobacco, and household and personal care product manufacturers.

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Stocks are under pressure

Major retailer stocks are under pressure. Continued weakness in the margins didn’t sit well with investors. Amazon (AMZN) is expanding in the grocery space by adding more Whole Foods stores to offer a fast delivery and pickup service.

However, we think that Walmart is positioned to gain from increased consumer spending, expanded digital offerings, and investment in price. Walmart has acquired numerous online retailers that will likely fortify its e-commerce offerings and attract young customers.

Walmart has significantly expanded its online grocery pickup and delivery services, which are expected to drive its e-commerce sales and comps. Walmart has added pickup towers or order dispensers to add to consumers’ convenience. All of these measures are expected to position Walmart to compete with Amazon and Target.

Walmart’s strategy to expand its digital offerings in Canada and the United Kingdom and investment in price should drive its top line in international markets.

However, pressure on Walmart’s earnings from value pricing, increased fulfillment costs, and the Flipkart acquisition could continue to hurt the stock.


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