WMT Stock Should Gain from New Acquisitions

Walmart stock.E-Commerce Focus Will Likely Take WMT Stock Higher

Wal-Mart Stores Inc (NYSE:WMT) posted its fourth-quarter results on Tuesday, and the strong growth in e-commerce sales in the 2016 holiday season surprised investors. Walmart stock got a lift from this good news, closing three percent up, at $71.45.

Wal-Mart Stores announced its Q4 and full-year financial results on Tuesday and pleasantly surprised many with the growth in its online sales. For the fourth quarter, earnings were $1.30 per share and total revenue increased by one percent, to $130.9 billion. (Source: “Walmart U.S. Q4 comps grew 1.8% and Walmart U.S. eCommerce GMV grew 36.1%…” Wal-Mart Stores Inc, February 21, 2017.)

Wal-Mart’s U.S. comp sales increased 1.8%, driven by a traffic increase of 1.4%. The same-store sales number was significant for WMT stock, and the retailer did not disappoint on this.

E-commerce growth at Wal-Mart U.S. was strong as sales and gross merchandise volume (GMV) increased 29% and 36% respectively, including for Wal-Mart’s Jet.com and online grocery business. As I wrote earlier, the company’s e-commerce push, through the Jet.com acquisition, should be positive for Walmart stock.

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Although net sales at Wal-Mart International were $31.0 billion, which was a decrease of 5.1%, it will take some time for the company’s strategy to bear fruit. For the fiscal year 2017, Wal-Mart generated total revenue of $486.0 billion and guided for an earnings per share (EPS) of $4.20 to $4.40 for fiscal 2018.

As the world’s largest retailer, the company could improve its Q4 sales on account of an improved in-store shopping experience, discounts offered over the holidays, and better options for online shopping. As the company continues to focus on customer experience in the future, Walmart stock will likely continue to gain further.

In the earnings call, Wal-Mart CEO Doug McMillon seemed excited about the solid fourth quarter and continued momentum in the business. He was particularly pleased with the traffic in Wal-Mart stores. The U.S. gross merchandise value grew 36% in the quarter, and Sam’s Club delivered its best comp sales growth of the year. (Source: “Wal-Mart Stores, Inc. (NYSE: WMT) Fourth Quarter Fiscal Year 2017 Earnings Call,” Wal-Mart Stores Inc, February 21, 2017.)

Discussing the progress in e-commerce, McMillon asserted that investments to accelerate growth in online business will continue. Wal-Mart Stores is the second-largest U.S. online retailer by revenue, one of the top three online retailers by traffic, and the Wal-Mart app is among the top three retail apps.

Wal-Mart recently announced free two-day shipping on millions of items (with a minimum order of $35.00). As expected, there has been an impressive uptick in e-commerce sales since this launch. WMT stock also gets good lift every time there is good news on the company’s e-commerce business.

Wal-Mart Stores has also acquired ShoeBuy.com, Inc. and Moosejaw (officially New Moosejaw, LLC) this year, which is going to further strengthen its position against the online retailing giant Amazon.com, Inc. (NASDAQ:AMZN).

ShoeBuy is an online retailer for clothing, footwear, and accessories, which would give a strong boost to Jet.com. Moosejaw is a retailer that carries luxury outdoor brands and has strong online presence. These acquisitions helped Wal-Mart get immediate expertise and capabilities in new and upscale categories of merchandise. And, in the coming year, it will likely be a big boost for Walmart stock.

As the company continues investing in acquisitions and raising its workers’ pay, profits are likely to take a hit. However, in the long run, WMT stock should gain from these investments as Wal-Mart Stores strengthens its online presence.