{"id":59039,"date":"2023-10-25T06:00:20","date_gmt":"2023-10-25T10:00:20","guid":{"rendered":"https:\/\/www.ino.com\/blog\/?p=59039"},"modified":"2023-10-25T16:58:05","modified_gmt":"2023-10-25T20:58:05","slug":"walmart-wmt-tackles-inflation-buy-or-sell-move-for-investors","status":"publish","type":"post","link":"https:\/\/wwwtest.ino.com\/blog\/2023\/10\/walmart-wmt-tackles-inflation-buy-or-sell-move-for-investors\/","title":{"rendered":"Walmart (WMT) Tackles Inflation: Buy or Sell Move for Investors?"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Inflation accelerated significantly last year, hitting a four-decade high of 9.1% in June 2022, pushing food prices higher. This led to many retailers experiencing consumers pulling back on spending. While inflation has fallen sharply from its peak, it is still higher than the Fed\u2019s target.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">According to a Labor Department report, the Consumer Price Index (CPI), a closely followed inflation gauge,<\/span><a href=\"https:\/\/www.cnbc.com\/2023\/10\/12\/cpi-september-2023.html\"> <span style=\"font-weight: 400;\">grew 0.4% in September<\/span><\/a><span style=\"font-weight: 400;\"> and 3.7% year-over-year, beating respective Dow Jones estimates of 0.3% and 3.6%. Food costs were up 0.2% for the third quarter in a row. On a 12-month basis, food costs jumped 3.7%, including a 6% surge for food away from home.<\/span><\/p>\n<p><b>Walmart Cuts Grocery Prices Amid Inflation<\/b><\/p>\n<p><span style=\"font-weight: 400;\">With persistent inflation in mind, popular grocery chains are trying to help customers save with new deals.<\/span><a href=\"https:\/\/quotes.ino.com\/charting\/?s=NYSE_WMT\"> <span style=\"font-weight: 400;\">Walmart Inc. (WMT)<\/span><\/a><span style=\"font-weight: 400;\">, the country\u2019s largest grocer, recently announced that it would be \u201cremoving inflation\u201d on some of its grocery prices starting next month.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cThis year, finally, we are able to have the Thanksgiving basket that the<\/span><a href=\"https:\/\/abcnews.go.com\/GMA\/News\/despite-inflation-walmart-ceo-thanksgiving-meal-cost-year\/story?id=104064911\"> <span style=\"font-weight: 400;\">prices are coming down versus a year ago<\/span><\/a><span style=\"font-weight: 400;\"> -- we are really proud to say that the price of a Thanksgiving meal is going to come down,\u201d Walmart U.S. President and CEO John Furner said during an exclusive interview on \u201cGood Morning America.\u201d<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Last year, during a period of historically high inflation, WMT sold Thanksgiving ingredients at the same price as 2021. This year, the Thanksgiving basket from Walmart includes ingredients to make a meal for up to 10 people, which the company will \u201csell for around $2 less than last year\u201d at just over $70.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Furner added that this move of cutting prices comes on the heels of consumer feedback: About 92% of its shoppers have expressed \u201csome level of concern about inflation and how it will impact holiday celebrations.\u201d<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Like Walmart, fast-growing discounter Aldi expressed a similar sentiment about \u201chigh food prices\u201d and announced price cuts of up to 50% starting November 1 and running through the year-end on more than 70 Thanksgiving favorites.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">With food retailers offering temporary discounts on select items during peak seasons, including the holidays, a high volume of customers would drive into their stores and online for substantial savings. This is an effective way to boost sales, build customer loyalty, and have a competitive edge over peers.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Overall, holiday sales in November and December have averaged<\/span><a href=\"http:\/\/nrf.com\/research-insights\/holiday-data-and-trends\/winter-holidays\/winter-holiday-faqs\"> <span style=\"font-weight: 400;\">approximately 19% of total retail sales<\/span><\/a><span style=\"font-weight: 400;\"> over the last five years, and the figure can be higher for some retailers, according to the National Retail Federation.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Strong sales during the holiday season should give a solid boost to WMT\u2019s stock. Shares of the retailer have gained nearly 6% over the past six months and 17% over the past year.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Let\u2019s look at several other factors that could influence WMT\u2019s performance in the upcoming months.<\/span><\/p>\n<p><b>Robust Financial Performance<\/b><\/p>\n<p><span style=\"font-weight: 400;\">For the fiscal 2024 second quarter that ended July 31, 2023, WMT reported revenue of $161.63 billion, beating analysts\u2019 estimates of $160.27 billion. This represents a 5.7% year-over-year increase. Its adjusted operating income rose 8.1% from the prior-year quarter to $7.40 billion. The company\u2019s consolidated net income was $8.05 billion, an increase of 56.5% year-over-year.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Furthermore, the retailer\u2019s adjusted EPS came in at $1.84, compared to $1.77 in the previous year\u2019s period and the $1.71 expected by analysts. Its free cash flow for the six months ended July 31, 2023, was $9 billion, representing an increase of $7.20 billion compared to the same period in 2022.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cWe had another strong quarter. Around the world, our customers and members are prioritizing value and convenience. They\u2019re shopping with us across channels \u2014 in stores, Sam\u2019s Clubs, and they\u2019re driving eCommerce, which was up 24% globally. Food is a strength, but we\u2019re also encouraged by our results in general merchandise versus our expectations when we started the quarter,\u201d said Doug McMillon, WMT\u2019s President and CEO.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cOur associates helped deliver increases in transaction counts and units sold, and profit is growing faster than sales. We\u2019re in good shape with inventory, and we like our position for the back half of the year,\u201d McMillon added.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Walmart\u2019s CFO, John David Rainey, said he feels better about spending patterns than he did three months earlier, yet he described the consumer as \u201cchoiceful or discerning.\u201d He added that seasonal moments like the Fourth of July holiday and back-to-school have helped drive sales during the second quarter.<\/span><\/p>\n<p><b>Upbeat Full-Year Guidance<\/b><\/p>\n<p><span style=\"font-weight: 400;\">WMT raised its full-year 2024 forecast as the retailer stays committed to its low-price strategy to draw grocery customers and boost online spending. The big-box retailer now expects full-year consolidated net sales to grow by about 4% to 4.5%, compared with its prior guidance for consolidated net sales gains of 3.5%.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Further, Walmart said that its adjusted EPS for the year will range between $6.36 and $6.46, above its previous guidance of $6.10-$6.20. The company anticipates its consolidated operating income to increase approximately 7% to 7.5%.\u00a0\u00a0<\/span><\/p>\n<p><b>Impressive Historical Growth<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Over the past three years, WMT\u2019s revenue and EBIT grew at CAGRs of 5.2% and 4.6%, respectively. The company\u2019s normalized net income increased at a CAGR of 5.8% over the same time frame, while its tangible book value grew at a CAGR of 3.9%.<\/span><\/p>\n<p><b>Favorable Analyst Estimates<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Analysts expect WMT\u2019s revenue for the third quarter (ending October 2023) to come in at $158.30 billion, indicating an increase of 4.5% year-over-year. The consensus EPS estimate of $1.51 for the same period reflects a 0.6% year-over-year improvement. Moreover, the company has topped the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In addition, Street expects WMT\u2019s revenue and EPS for the fiscal year (ending January 2024) to increase 5.5% and 2.9% from the previous year to $639.22 billion and $6.47, respectively. For the fiscal year 2025, the company\u2019s revenue and EPS are expected to grow 3.6% and 10% year-over-year to $661.94 billion and $7.11, respectively.<\/span><\/p>\n<p><b>Attractive Dividend<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Earlier this year, WMT\u2019s Board of Directors approved an annual cash dividend for fiscal year 2024 of $2.28 per share, up nearly 2% from the $2.24 per share paid for the last year 2023. The final quarterly installment of $0.57 per share would be paid on January 2, 2024, to shareholders as of record on December 8, 2023.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">WMT\u2019s annual dividend translates to a yield of 1.40% on the current price level, and its four-year average yield is 1.60%. Its dividend payouts have grown at a 1.8% CAGR over the past three years. The company has raised its dividend for 49 consecutive years.<\/span><\/p>\n<p><b>Bottom Line<\/b><\/p>\n<p><span style=\"font-weight: 400;\">WMT\u2019s second-quarter earnings beat analysts\u2019 expectations as more Americans turned to the retailer for groceries and to shop online. Further, the company raised guidance for the fiscal year 2024 to reflect the second quarter upside, confidence in continued business momentum, and ongoing customer response to its value proposition.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As it sticks to its low-price reputation to draw grocery shoppers and boost online spending, the big-box retailer recently announced slashing grocery prices amid elevated inflation and help customers save more money with new deals for the holiday season, starting November.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In the previously reported quarter, seasonal moments such as the Fourth of July holiday and back-to-school have helped drive sales significantly. These sales trends typically signal patterns for the months ahead, including the holiday season.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Given its robust financials, attractive dividends, and promising growth outlook, WMT could be an ideal investment now.\u00a0\u00a0<\/span><\/p>\n<!-- AddThis Advanced Settings generic via filter on the_content --><!-- AddThis Share Buttons generic via filter on the_content -->","protected":false},"excerpt":{"rendered":"<p>Inflation accelerated significantly last year, hitting a four-decade high of 9.1% in June 2022, pushing food prices higher. This led to many retailers experiencing consumers pulling back on spending. While inflation has fallen sharply from its peak, it is still higher than the Fed\u2019s target. According to a Labor Department report, the Consumer Price Index [&hellip;]<!-- AddThis Advanced Settings generic via filter on get_the_excerpt --><!-- AddThis Share Buttons generic via filter on get_the_excerpt --><\/p>\n","protected":false},"author":41,"featured_media":57558,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[32903,32905,32904,31913],"class_list":["post-59039","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-approximately-19-of-total-retail-sales","tag-grew-0-4-in-september","tag-prices-are-coming-down-versus-a-year-ago","tag-walmart-inc-wmt"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v23.4 (Yoast SEO v23.6) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Walmart (WMT) Tackles Inflation: Buy or Sell Move for Investors? - INO.com Trader&#039;s Blog<\/title>\n<meta name=\"description\" content=\"Walmart\u2019s (WMT) second-quarter earnings and revenues beat analysts\u2019 estimates, and the company raised full-year 2024 guidance. 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