Walmart's Online and Well-Heeled Appeal
Last September, we named Walmart as one of our top picks. Since then, the stock has gained over 17%.
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Shares of Walmart WMT shot higher by over 7% after reporting earnings on Thursday morning. The Bentonville, Arkansas-based giant trounced earnings estimates by 14%, beat estimated revenues by 1%, and made several surprising announcements that pleased investors.
In perhaps the brightest spot in the report, online sales gained 22% in the U.S., and 21% globally. That’s huge, because Walmart has faced challenges with growth in the online space for years. In the e-commerce space, Walmart trails far behind the world’s biggest online retailer, Amazon AMZN.
Last year, Walmart’s share of online retail sales was 6.4%. That’s good enough for second place, but seems paltry when compared with Amazon, which boasts 37.6% of all online sales. Walmart has plenty of room for growth in online sales, and that potential is finally turning into profit.
In September of last year, we named Walmart as one of our top picks, as described here. Since then, the stock has gained over 17%. This figure reflects Walmart’s 3-for-1 stock split, which occurred in February.
At that time, we were looking for a stock that was technically strong, and a business that stands to benefit from consumers’ desire to spend less. Today, that description still rings true.
Walmart is trading well above its rising 50-day (blue) and 200-day (red) moving averages. The stock’s 7% gain on Thursday helped propel the Dow Jones Industrial Average above 40,000 for the first time. The rally featured Walmart’s highest turnover in two months (arrow), a healthy sign. Walmart has been trending higher since May of 2022.
It makes sense that consumers would favor a store that features low prices during a time of persistent inflation. That seems to be true even at the high end, as an increase in well-heeled consumers aided Walmart in the just-ended quarter.
According to data analytics provider Placer.ai, consumers with household earnings between $100,000 and $150,000 were the second biggest group of Walmart shoppers in 2023. Not only does this go against popular Walmart stereotypes, it presents an opportunity to capture that group on an ongoing basis.
Walmart remains a long-term portfolio holding. With major gains in the online space, and a broader appeal among all types of consumers, the future continues to look bright for the retail icon.
At the time of publication, Ponsi was long WMT.
