Walmart Powers Search Engine

Zacks Equity Research

Walmart Stores (WMT) edged a step closer to its customer’s hearts as it announced a new search engine for the company website. The online users can browse, select and buy items more easily and faster from

The new engine, christened ‘Polaris’, was designed and developed by WalmartLabs, the company’s hub for creating technologies and businesses in social and mobile commerce for global shoppers. WalmartLabs was formed after Walmart acquired Mountain View-based Kosmix, a social media technology provider.

Experts in information retrieval, machine learning and text mining were engaged to design and develop Polaris and is fully powered by Polaris now.

Polaris has the ability to understand the intent and taste of the user, subsequently coming out with best possible results for the customers rather than giving a standard list that is not important to the users.

The new engine is a success already as shoppers buying products after searching through Polaris jumped 10% to 15%. It is expected to accelerate Walmart's efforts to boost its international e-commerce sites over the coming months.

Earlier in December last year, WalmartLabs had launched its first Facebook Inc. (FB) application, Shopycat, to help its buyers choose gifts for their friends online and avoid the holiday season rush. The details can be found at: Walmart's App Picks the Right Gift

Walmart is the sixth-largest Internet retailer and has been focusing on expansion of its presence in the online business. It has already developed its online businesses in US, UK, Canada and Brazil. Walmart has also increased its controlling stake to 51% in Chinese Internet retailer Yihaodian in order to further strengthen its position. Walmart has improved its access to Chinese consumers who increasingly use smartphones and social media to shop.

In January 2012, Walmart also acquired Small Society, the mobile agency in Portland, which helps organizations create, develop and launch iOS products and services for iPhone, iPad and iPod touch.

Other retail biggies are also promoting online sales. In early November 2011, EBay Inc. (EBAY) launched an online service, Group Gifts, which connects eBay shoppers with friends in Facebook to collectively purchase presents.

The new effort by WalmartLabs is expected to further drive the earnings. In the latest concluded quarter, the company reported earnings of $1.18 a share, beating the Zacks Consensus Estimate by a penny and prior-year quarter’s adjusted earnings by 8%.

For the third quarter of 2013, Wal-Mart expects its earnings to range between $1.04 and $1.09 per share. For fiscal 2013, Wal-Mart upped and narrowed its guidance range to $4.83 to $4.93 from prior forecast of $4.72 to $4.92. The current guidance reflects an upside from fiscal 2012 levels.

The Zacks Consensus Estimate is pegged at $1.06 and $4.91 for the third quarter and fiscal year 2013, respectively.

Our Recommendation

We currently have a Neutral recommendation on Wal-Mart, which competes with Costco Wholesale Corporation (COST) and Target Corp. (TGT). The stock carries a Zacks #3 Rank (a short-term ‘Hold’ rating).

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