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Walmart ‘flexed its muscle’ going into holidays: Jefferies analyst

·Markets Reporter
·2 min read
In this article:
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Walmart's (WMT) focus on supply chain and hiring is giving the company a leg up heading into the holiday season, according to one Wall Street analyst.

"Walmart flexed its muscle on the quarter and into" the holiday season, Jefferies Managing Director and Senior Research Analyst Stephanie Wissink said on Yahoo Finance Live (video above). "They talked a lot throughout the conference call [about] their ability to access supply when they needed it ... and to hire the people to serve the customer this holiday season with over 200,000 seasonal employees."

A man dressed as Santa Claus pets a toy as products are display for Christmas season at a Walmart store in Teterboro, New Jersey, U.S., October 26, 2016. REUTERS/Eduardo Munoz
A man dressed as Santa Claus pets a toy as products are display for Christmas season at a Walmart store in Teterboro, New Jersey, U.S., October 26, 2016. REUTERS/Eduardo Munoz

The company is also paying a bit more for workers this year against the backdrop of a national labor crunch and shipping amid the supply chain crisis, leading to a gross margin decline.

The details underscore the "tension between driving for sale and protecting margins," Wissink noted. "Being very conscious of the supply chain and rising costs of input, as well as labor... and at the same time trying to win the favor of consumers and drive market share."

Nevertheless, the retail giant posted a better-than-expected third quarter earnings. Same-store sales (excluding fuel) climbed 9.2%, far exceeding analysts estimates, and inventory rose 12% in the quarter, indicating shelves will be stocked for the busy holiday season.

The results indicated customer resiliency amid price hikes and inflationary pressures.

"They're seeing some indication that the consumer is healthy," Wissink said. "They're responding to some of the early price action, not seeing deterrents."

One factor helping Walmart seems to be wage inflation among consumers..

"Their income profile — of the consumer — is seeing one of the highest increases in wage rates," Wissink said, adding that "consumers like to shop in stories. About 60-65% of the comps were driven by in-store traffic. ... The American culture hasn't give up yet on retail stores."

Ines is a reporter for Yahoo Finance Follow her on Twitter @Ines_Ferre

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