Here's Why Walmart (WMT) Appears to be in Solid Shape Now

Zacks Equity Research
·5-min read

The retail dynamics have been changing every now and then and hence, companies, which are prompt in responding to consumers’ evolving shopping patterns, stand to gain. One big name in the retail space, which has been consistently benefiting from its concerted efforts to resonate with consumers’ evolving shopping trends, is Walmart Inc. WMT. The omnichannel retailer’s efforts to step up its e-commerce game and improve store experience have been yielding results, which is also helping it stay firm amid the growing competition from Amazon AMZN.

Walmart’s strong footing in the retail space, courtesy of its splendid growth endeavors, helps it make the most of all industry opportunities. Markedly, the company has been benefiting from the burgeoning demand for grocery and general merchandise items amid coronavirus-led stay-at-home trends. In fact, the elevated stay-at-home trends are largely boosting this supermarket biggie’s e-commerce sales. Further, Walmart is undertaking solid endeavors to capitalize on the holiday season opportunities. Last month, the omnichannel retailer unveiled a slew of measures — elevated online shopping, fast and safe shopping experience and evolving wish lists — to address customers’ core shopping patterns, especially for this festive period.  

All these factors keep Walmart in solid shape and have also helped the Zacks Rank #2 (Buy) stock gain 10.5% in the past three months compared with the industry’s growth of 9.7%. Let’s delve deeper into the aspects defining the big-box retailer’s robust prospects. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Holiday Season Opportunities

Retailers are in action with respect to this year’s holiday season and have been kicking-off deals earlier to make the most of this significant revenue-generating period. With safety being the highest priority this year, shoppers are increasingly resorting to online purchasing, pushing retailers to reimagine digital store concepts and augment omnichannel capabilities. Walmart, which has been proactively fulfilling such evolving trends, recently unveiled that it will host a reinvented Black Friday. The company will host three events instead of one single day to bring customers "Black Friday Deals for Days.

Apart from this, the supermarket giant offered numerous attractive deals in its five-day Big Save Event from Oct 11-15. Further, to cater to the holiday season rush, the company is on track with hiring more than 20,000 seasonal workers at its countrywide e-commerce fulfillment centers. The hiring commenced on Sep 23, 2020, and is likely to continue till January 2021. Additionally, the company remains focused on offering a safe and convenient experience through measures like reduced shopping hours, efficient traffic management and contactless pickup and delivery and payment options, among others, during the holiday season. Finally, Walmart is set to resonate with customers’ evolving needs for what to shop, as the pandemic has altered consumers’ living patterns. Thus, the company is making moves to stay equipped with holiday gifts suited for the new normal amid the pandemic.

Pandemic-Led Demand

Walmart has been benefiting from burgeoning demand for essential items amid coronavirus. Such trends drove the company in second-quarter fiscal 2021, wherein both top and bottom lines cruised past the Zacks Consensus Estimate and grew year over year, with the U.S. segment seeing its 24th straight quarter of comparable store sales growth. The company continued to see customers consolidating their shopping trips, leading to a bigger average basket size. Also, the company continued seeing an increased shift toward e-commerce. Notably, both store and online sales remained strong, especially in general merchandise, supported by government stimulus spending. Given the higher stay-at-home trends, the company saw strength in sporting goods, landscape, electronics and home categories. Grocery sales were also robust. Other retailers gaining from such pandemic-driven demand include Target TGT and Kroger KR, to name a few.

Robust Omnichannel Efforts

Walmart’s e-commerce business is seeing greater heights due to the pandemic-led social distancing. In its second-quarter conference call, management informed that the company’s stores and online merchant teams are integrated now, which is likely to yield results. Further, the company recently unveiled an absolutely fresh look and feel for its stores, which will offer customers a digitally-supported shopping experience. Notably, Walmart has been taking several e-commerce initiatives, including buyouts, alliances, and improved delivery and payment systems, in order to build an impressive digital brand portfolio.

Apart from this, it has been making inroads into the burgeoning online grocery space, which has long been a major contributor to e-commerce sales. U.S. e-commerce sales soared a whopping 97% in the second quarter with strength across all channels. The company recently unveiled its Walmart+ membership program, offering unlimited free delivery of more than 160,000 items sold in stores, including groceries. Additionally, customers can avail discounts for fuel and have Scan & Go options to skip the checkout line. Prior to this, the company launched Express Delivery during the first quarter of fiscal 2021 at several stores, which helps it deliver orders to customers in less than two hours.

Clearly, Walmart is turning every leaf to keep things bright in the road ahead.

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