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Walmart (WMT) is in the race again this year.
The retail giant beat fourth-quarter revenue estimates, announced the acquisition of smart TV maker VZIO, and implemented a 3-for-1 stock split. It also continues to attract shoppers from all income levels while setting new stock price records.
The company’s growing grocery business has become a key attraction for cautious consumers who shop for essentials but don’t go to purely discretionary retailers.
Deutsche Bank analyst Christina Katai told Yahoo Finance over the phone that 60% of Wal-Mart’s sales in the U.S. come from groceries alone, and that “Walmart will continue to grow in the next few years with lower-end and higher-end products.” “We are facing the dual tailwinds of capturing both types of consumers,” he said on the phone.
Katai said there is a growing trend among high-income shoppers who value value, and they are leaning toward e-commerce services like Walmart.com and Walmart+.
Struggles with discount retailers like Dollar Tree, which will close 1,000 Family Dollar stores over the next few years, only strengthen Walmart as a budget destination. The chain is “in a very strong position to continue to gain market share in the lower price segment due to Family Dollar store closures,” Katai added.
Citi analyst Paul Lejue wrote in a client note that Walmart is “well-positioned as the largest U.S. food retailer, especially at a time when macro direction remains uncertain and consumers continue to seek value.” said.
The company’s size and close relationships with vendors give it pricing advantages and the ability to continue promotions such as “rollbacks” and temporary sales.
“The number of rollbacks increased by about 50% year-on-year in the second half of last year,” Katai said.
On March 21, 2024, Walmart stock reached a closing high of $61.45 per share. So far this year, the company’s stock is already up 14%, outpacing the S&P 500 (^GSPC) 10% increase.
Rival Target (TGT) may gain momentum as it plans a comeback after a lackluster 2023. The company’s stock price has increased 20% since the beginning of the year.
“Walmart is defensive.” [stock]So whenever we see a flight to safety, we think Walmart will benefit from that,” Katai said, adding that he expects the stock price to continue rising.
Management’s reinvestment in the business, including automating its supply chain and fulfillment centers, is driving sales growth and operating profit.
Lejuez wrote that the company is “significantly ahead of its retail competitors in terms of technology investments, which we believe will enable us to further reduce unit costs over time.”
U.S. operating income increased 13.0% year over year in the fourth quarter, and U.S. same-store sales increased 5.6%.
The company is also investing $9 billion over two years to modernize more than 1,400 U.S. stores, which will enhance product assortments and increase convenience options such as pickup and delivery. Masu. The company is becoming “a very different Walmart than it was five to 10 years ago,” Katai said.
The $2.3 billion deal with Vizio could pave the way for additional revenue streams in the coming years as Walmart moves into advertising. Amazon commands more than $50 billion in annual advertising revenue, but Walmart will only manage $3.4 billion in 2023, leaving it with plenty of room to catch up.
”[Advertising] “It’s a fast-growing, high-margin part of our business,” Walmart Chief Financial Officer John David Rainey said recently on Yahoo Finance Live. is very complementary to what we do organically.”
Joe Feldman, senior managing director at Telsey Advisory Group, told Yahoo Finance by phone that consumer data is “very valuable” because it leads to growth in other parts of the company’s ecosystem, particularly its Walmart+ membership platform. he said.
Walmart is “trying to build something like Amazon Prime, and this could be a way to do that,” Feldman added. But he’s skeptical about the price Walmart is paying and how it will affect other retailers that sell Vizio TVs, including Costco (COST), Target and Best Buy (BBY). Walmart is the largest seller of Vizio TVs.
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Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on Twitter @brooke di palma Or email bdipalma@yahoofinance.com.
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