Reports Q3 2021 results on Tuesday, November 17, before opening
Revenue Expectation: $ 132.08 Billion
EPS expectation: $ 1.18
Some of the largest grocers in the US have had a tremendous run so far this year. With few other ways to spend, as the deadly pandemic kept consumers locked and close to home, many have overloaded their pantries to avoid extra forays into shops.
One of the main beneficiaries of this trend: America & # 39; s largest retailer, Walmart (NYSE 🙂 whose sales – aided by its massive physical presence and growing e-commerce capabilities – soared, adding to the top and bottom.
With still high expectations, investors have already pushed WMT shares to a new record. They closed at $ 150.54 on Friday, after gaining about 27% this year. This virtually exceeds the 11% gain over the same period and also the 19% rise of the SPDR® S&P Retail ETF (NYSE :).
But the major concern for shareholders now is how much further can this rally go? For one thing, there remains great uncertainty as to when and whether the new administration will be able to organize a new round of stimulus to support the US economic recovery.
Talks between Democrats and Republicans stalled about the size of the aid package in the run-up to the election. The divided mandate, the result of the elections in November, has further complicated the negotiations when they resume.
Walmart and other retailers have emphasized the importance of such an incentive in their latest profit statements. The megaretailer in Bentonville, Arkansas, said the stimulus money has fueled sales in both its eponymous stores and the Sam's Club chain. The company said consumers who had that money in their wallets were also driving sales in general high-margin categories. But "as stimulus funds declined, sales began to normalize," the retailer said.
E-Commerce Push
Despite the uncertainty about the stimulus measures, there are reasons to believe that Walmart's stock will be on the upside in the long term, given the of the company in its pivotal battle with Amazon (NASDAQ 🙂 to gain online customers.
In the past quarter, Walmart launched its Walmart + subscription service, which offers members unlimited free home delivery of more than 160,000 items, including groceries, provided they spend at least $ 35 per order.
Tuesday's earnings report will provide a first glimpse of whether customers are warming up to the service, which, if successful, could give new impetus to WMT sales. Even before this initiative, Walmart had reaped the benefits of its massive investment in its online channels.
During the second quarter, online sales were up 97% year-on-year, with both takeout and delivery options all-time high sales volumes. This strong e-commerce expansion was accompanied by a 27% increase in average ticket size, the total bill, as people consolidated their purchases into fewer, albeit larger, orders.
Bottom Line
After a notable rally this year, Walmart stocks can look expensive to some investors. Those concerns, in our view, ignore the fact that Walmart is entering a new growth cycle after the pandemic changed the way many people shop for their daily needs.
With its e-commerce momentum and strong core brick and mortar operations, Walmart is well positioned to capitalize on this shift, meaning its inventory has more room to run.
