drone pilot industryFactors Narrating Walmart’s (WMT) Impressive Growth Story

June 22, 2021by helo-10
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Walmart Inc. WMT, which has created an unparallel niche in the supermarket space, has been benefiting from its constant efforts to keep pace with the evolving retail environment. Certainly, the supermarket biggie’s combination of a robust store network and growing digital capacity (especially enhanced delivery) has been working well. Further, Walmart has been gaining on high demand for essentials amid the pandemic-induced elevated stay-at-home trends. Increased social distancing also accelerated its e-commerce business.

Such upsides were reflected in the company’s first-quarter fiscal 2022 results, which marked its 27th consecutive quarter of U.S. comp sales growth. Moreover, Walmart raised its guidance for fiscal 2022. The company envisions high-single-digit growth in adjusted earnings per share. Excluding divestitures, the same is anticipated to jump low-double digits. Earlier, Walmart projected a marginal decline in adjusted earnings per share for fiscal 2022. Excluding divestitures, the same was anticipated to be flat to slightly up. Importantly, the Zacks Consensus Estimate for fiscal 2022 has risen 1.4% to $5.91 per share over the past 30 days.

The abovementioned growth endeavors have been boosting investors’ spirits, as evident from this Zacks Rank #2 (Buy) stock’s rally of 14.4% in the past year compared with the industry’s growth of 13.6%. Flaunting a VGM Score of B, Walmart has a long-term earnings per share growth rate of 5.5%. All said, let’s take a closer look at the factors driving this retail giant’s performance and helping it stay firm amid the growing competition from Amazon AMZN. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Investment Research

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E-commerce Game Well Played

Walmart’s e-commerce business and omnichannel penetration have been increasing, all the more amid the pandemic-led social distancing. The company has been taking several e-commerce initiatives, including buyouts, alliances, and improved delivery and payment systems. On May 13, 2021, Walmart unveiled plans to acquire Zeekit, which is focused on uniting fashion and technology via its virtual fitting room platform. During the third quarter of fiscal 2021, Walmart had unveiled an additional investment in India’s Ninjacart, for technology and supply-chain solutions. Apart from these, the company’s contracts with Goldman Sachs GS, Shopify SHOP, Green Dot and Microsoft; buyouts of ShoeBuy, Moosejaw and Bonobos, among others, underscore its intention to build an impressive digital brand portfolio. Further, the buyout of a major stake in Flipkart has been bolstering its International segment.

Further, Walmart is making aggressive efforts to expand in the booming online grocery space, which has long been a major contributor to e-commerce sales. In fact, the company’s delivery service has become all the more vital amid the coronavirus-led social distancing. Walmart has taken robust strides to strengthen its delivery arm, as evident from its investment in DroneUp; pilot with HomeValet, introduction of Carrier Pickup by FedEx, launch of the Walmart + membership program; alliance with Door Dash; drone delivery pilots in the United States with Flytrex and Zipline; and a pilot with Cruise to test grocery delivery through self-driven all-electric cars. Prior to this, Walmart unveiled Express Delivery, which helps it deliver orders to customers in less than two hours. In earlier developments, the company joined hands with Point Pickup, Roadie and Postmates, alongside acquiring Parcel to enhance its delivery service.

Furthermore, the company’s store and curbside pickup options add to customers’ convenience. As of the first quarter of fiscal 2022, Walmart U.S. had 3,800 pickup locations and more than 3,200 same-day delivery stores. U.S. e-commerce sales soared 37% in the first quarter with strength across all channels. Notably, marketplace and store pickup & delivery remained robust. At Sam’s Club, e-commerce sales jumped 47% on the back of a robust direct-to-home show and solid curbside performance. In the International segment, e-commerce sales surged nearly 64%.

Walmart Inc. Price, Consensus and EPS Surprise

Walmart Inc. Price, Consensus and EPS Surprise

Walmart Inc. Price, Consensus and EPS Surprise

Walmart Inc. price-consensus-eps-surprise-chart | Walmart Inc. Quote

Q1 Retains Sturdy Comp Sales Record

In first-quarter fiscal 2022, both top and bottom lines grew year over year and surpassed the Zacks Consensus Estimate. First-quarter results continued to gain on high demand across categories amid the pandemic, though divestitures related to Walmart International somewhat affected revenues. Nonetheless, continued e-commerce strength was an upside. Apart from these, U.S. results were favorably impacted by a stimulus. Management expects the continuation of pent-up demand throughout 2021. Further, it remained encouraged with the traffic trends and grocery market share position, as of the first-quarter earnings call. With more customers going out to shop in the United States, the company’s store environment is in good shape, while e-commerce also remains on the growth trajectory.

During the quarter, U.S. comp sales, excluding fuel, improved 6% on the back of a 9.5% rise in ticket. Comp sales continued to gain from strength in general merchandise and health & wellness categories. Walmart continued to see customers consolidating their shopping trips, leading to a bigger average basket size. E-commerce sales drove comps by 360 bps. Comp sales in Walmart U.S. (excluding fuel) are still expected to rise at a low-single-digit rate in fiscal 2022. For the second quarter, the company anticipates comp sales (excluding fuel) in Walmart U.S. to increase in low-single digits.

Without a doubt, Walmart’s incessant initiatives to resonate well with the changing retail landscape are likely to continue helping this Bentonville-based retailer climb the growth ladder.

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