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Walmart Gains from E-Commerce Growth, Hits 52-Week High

Zacks Equity Research

Walmart Inc. WMT has been a preferred pick for investors, courtesy of the retail behemoths constant endeavors to sharpen omnichannel capabilities. This is evident from the company’s series of efforts, ranging from prudent alliances to perk up e-commerce offerings, delivery services and payment channels. Also, it is making efforts to improve the International unit.

Backed by such upsides, shares of this Bentonville, AR-based company have rallied nearly 19% in past six months, outperforming the industry’s growth of 14.5%.  In fact, this Zacks Rank #2 (Buy) stock touched a 52-week high of $112.93, before closing the session a tad lower at $112.72 on Jul 8.



 

Factors Narrating Walmart's Growth Story

Walmart has been taking several e-commerce initiatives, including buyouts and alliances. To this end, the company’s strategic partnership with Microsoft MSFT; buyouts of ShoeBuy, Moosejaw, Bonobos, ModCloth and Jet.com; and deal with Lord and Taylor, among others, underscore its intention to build an impressive digital brand portfolio.

Also, the company’s plans to improve its website, enhance check-out process, and focus on Walmart2World money transfer service along with Walmart Pay mobile payment system and Mobile Express Returns program highlight its initiatives to accelerate online business and make shopping easier. Apart from this, it is making aggressive efforts to expand in the booming online grocery space, which has long been a major contributor to e-commerce sales.

Backed by such endeavors, U.S. e-commerce sales surged 37% in the first quarter of fiscal 2020. E-commerce sales improved on the back of strength in online grocery, and solid sales in the Home and Fashion categories on Walmart.com. These factors keep management optimistic about achieving 35% U.S. e-commerce sales growth in fiscal 2020.

Walmart remains committed to enrich consumers’ experiences by providing easy shopping methods and seamless grocery deliveries. The company’s contract with Point Pickup, Skipcart, AxleHire and Roadie; deal with Postmates, and buyout of Parcel highlight its focus on enhancing grocery sales. Further, its Walmart Pickup program enables customers to place orders online and pick them up at a store for free.

While consumers’ digital dependency is a boon for e-commerce, Walmart is utilizing this trend to perk up brick-and-mortar sales. In fact, physical stores have become a key link to drive online shopping, courtesy of strategies like in-store pickups. Notably, grocery pickups can be now availed at about 2,450 locations, with same-day delivery available in roughly 1,000 locations.

Moreover, the company expects roughly 3,100 grocery pickup locations and about 1,600 grocery delivery locations by the end of fiscal 2020. It also partnered with ride hailing services, Uber UBER and Lyft, for speedy online grocery deliveries, and tested same-day delivery with Deliv. We believe that these actions will help Walmart offer multiple choices to online grocery shoppers amid increasing competition from Amazon AMZN.

Additionally, the company remains committed toward achieving growth across all its markets, on the back of its fresh products, expansion of online grocery and private brands. Walmart is likely to gain from its steps to improve the international business unit. To this end, the company is making continued efforts to shift focus from underperforming areas to profitable regions like India and China.

This is clear from its sale of 80% of its stake in the underperforming Brazilian business. Also, Walmart’s buyout of major stake in Flipkart is helping the former expand its presence in India. Markedly, Walmart International net sales are expected to grow approximately 5% at constant currency in fiscal 2020.

We expect all aforementioned factors to continue bolstering the company’s performance, and help it sustain momentum.

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