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Walmart's (WMT) Shares Up 29% YTD: E-Commerce a Key Driver

Zacks Equity Research

Walmart Inc. WMT has left no stone unturned to maintain its supreme position in the supermarkets space. The company’s robust e-commerce efforts have been aiding its comparable store sales (comps). Notably, the second quarter of fiscal 2020 marked Walmart’s 20th straight quarter of U.S. comps growth.  Owing to such upsides, shares of this supermarkets giant have rallied 29.2% year to date, outpacing the industry’s growth of 25.3%.

Let’s delve deeper into the factors driving Walmart’s sturdy comps run.

E-Commerce Efforts Underway

Walmart is trying all means to keep pace with the growing dominance of e-commerce king Amazon AMZN. To this end, the big-box retailer has been taking several e-commerce initiatives, including buyouts, alliances, and improved delivery and payment systems. The company’s partnership with Microsoft; 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.

Further, Walmart’s buyout of 77% stake in Flipkart is driving its e-commerce sales. The company’s plans to improve its website, enhance the check-out process and focus on Walmart2World money transfer service along with Walmart Pay mobile payment system and the Mobile Express Returns program highlight its efforts to accelerate the online business and make shopping easier. Apart from this, Walmart is making aggressive efforts to expand in the booming online grocery space, which has long been a major contributor to its e-commerce sales.

Companies like Target TGT and Kroger KR are also taking strong measures to expand in the online grocery realm. In fact, Walmart recently announced plans to extend Delivery Unlimited to 1,400 stores by this fall. Prior to this, it joined hands with Point Pickup, Skipcart, AxleHire and Roadie to strengthen its online grocery delivery service in four states. Further, the company inked a deal with Postmates to extend its online grocery delivery service to cover more than 40% of the families in the United States. The company’s contract with DoorDash and acquisition of Parcel are also noteworthy.

We believe that these actions will help the company offer multiple choices to online grocery shoppers amid increasing competition from Amazon. Notably, Walmart U.S. exceeded 1,100 delivery locations during the second quarter and now has more than 2,700 pickup locations. Moreover, the company expects roughly 3,100 grocery pickup locations and about 1,600 grocery delivery locations by the end of fiscal 2020.

These factors keep management optimistic about achieving 35% of U.S. e-commerce sales growth in fiscal 2020. This along with Walmart’s efforts to enhance store experience via store expansions, assortment replenishments and store remodeling are likely to help it sustain the robust record. Clearly, this Zacks Rank #2 (Buy) stock is set to remain in investors’ good books. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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