Walmart Stock: How does WMT perform in the changing retail landscape

Grocery chain Walmart Inc. (NYSE: WMT) has an impressive track record of effectively navigating the ups and downs of the retail industry during times of uncertainty, but it doesn’t seem to be entirely resilient to the coronavirus crisis.  

Recent data indicate that once again consumers are pulling back on discretionary purchases, slowing down the recovery triggered by market reopening as their personal finances have come under pressure from the record-high inflation. What makes it painful for the store operator is that the shift in shopping habits has affected sales of high-margin, bulk items like home décor.

Buy WMT?

Last week, the company’s stock gained following the quarterly financial release, continuing its recovery from the losses suffered after the previous earnings announcement. However, WMT has stayed above its long-term average and mostly outperformed the broad market. That, combined with the favorable valuation, has created a unique buying opportunity. It is expected to reach new highs by mid-2023.

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Walmart Inc. Q2 2023 Earnings Call Transcript

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The Bentonville-based retail behemoth is touted as the country’s largest employer with around 2.3 million workers — 70% of them are employed in the US. Recently, it laid off about a couple of hundred employees as part of streamlining operations at the corporate headquarters amid concerns of weakening profitability. Many stakeholders believe the move could be an ominous warning about the new challenges facing the retail industry, against the rapidly-evolving economic backdrop.

Stable Sales

It is worth noting that the company reported flat earnings of $1.77 per share, on an adjusted basis, in the most recent quarter when revenues moved up 8% year-over-year to $153 million. Sales rose across all business divisions and geographical segments, aided by a 7% increase in comparable store sales. The results topped expectations.

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Typically, Walmart’s sales are steadier than those of its peers. The management retained its earlier outlook for the second half, which was lowered a few weeks ago to reflect the strain on margins and inflationary pressures. The guidance is in line with its earlier decision to go for aggressive markdowns to ease inventory build-up. By now, it is pretty clear that the challenges posed by elevated inflation and supply chain disruption would remain a drag on the retail sector.

From Walmart’s Q2 2023 earnings conference call:

“Our fall and holiday products look great. There’s a lot of newness, and we’ve got a strong position in opening price points across categories, from Halloween to Christmas, to Flipkart’s Big Billion Days, we will be ready. We’ll have a cleaner inventory position, and we’ll have a strong seasonal presence. We expect inflation to continue to influence the choices that families make and we’re adjusting to that reality, so we can help them more.”

Update

Last month, Walmart acquired Volt Systems, which provides suppliers with enhanced on-demand visibility into merchandising resources. The deal, which is expected to allow the company to better anticipate customer demand, came on the heels of the management revealing plans to acquire AR optical tech company Memomi.