Three experts weigh in on Walmart as the company soars on earnings

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Walmart shares soared Tuesday after the company beat on earnings, a move that took the stock’s gains into double-digit territory for 2019. The retail giant saw better-than-expected returns on grocery sales and managed to grow e-commerce sales by 43 percent between the most recent two quarters, destroying estimates for the holiday season.

Three experts weigh in on what’s next for Walmart:

  • Pro4ma founder Liz Dunn thinks the beat points toward a strong future for Walmart, even in the presence of Amazon. “When you have a big quarter like this, the fourth quarter, where you saw this strong flow through, that gives some credence that the stock has risen to the level that it has,” said Dunn. “Long term, they’re using their size to increase their dominance and to really go head-to-head against Amazon, and I think that’s important and it’s obviously working.”
  • UBS retail analyst Michael Lasser highlighted Walmart’s strong e-commerce growth in the grocery space, but said that the company can’t just rely on that going forward. “As they continue, we expect to see a rationalization of that side of the business. Where they need to do better is on the more traditional side of e-commerce,” said Lasser, “Individual packages to individual homes of areas like apparel and home furnishings, that’s going to get the gross profit dollars for that business to be better, and pare some of the operating losses that they’re cheating from investing so much in that business.”
  • Charles O’Shea, lead Walmart analyst at Moody’s, sees Walmart’s increasing capital expenditures as a good sign moving forward as it shifts into the e-commerce space. “The store growth is slowing. I can remember covering the company when I started at Moody’s in 2002. These guys were building stores like crazy,” said O’Shea. “Now they’re not building stores, but they’re spending roughly the same amount of money on capex. It’s going to tech spend, it’s going to e-commerce. I think that Walmart is going to continue to do that, they will continue to invest. Buy online, pick up in store is a powerful model to compete with Amazon.” O’Shea also noted that Walmart’s existing brick-and-mortar locations provide it with leverage in an important area. “Food delivery, which is something that we’re still, kind of, looking at saying, ‘gee, how much demand will there be for that over time?’ Walmart is going to leverage that store base. Those stores are assets – not liabilities – and Walmart has proved that.”
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