Walmart (WMT 99.46, -2.07, -2.04%) is down 2% despite reporting strong third
quarter results this morning.
The Walmart U.S. segment, which contributes about two-thirds of the retailer’s total sales, reported same-store sales up 3.4% excluding fuel, modestly better than Wall Street's expectations. That is a very impressive result on top of such a large base. The segment reported 2.7% growth in the third quarter of last year. Recall, the 4.5% comparable store sales growth reported back in the second quarter was the best achieved at Walmart U.S. in over ten years. The company gained market share in key categories, including food, consumables, and many areas of general merchandise, according to Nielsen and The NPD Group.
Strength in the U.S. consumer is a key tailwind while investments in eCommerce and technology are taking hold. In the eCommerce business, sales growth accelerated to 43%. The company has bolstered its online efforts organically as well as through its acquisitions of a diverse collection of companies like Jet.com and Bonobos.
The Dow component raised EPS and sales guidance for the year. Walmart U.S. sales are now expected to grow by “at least 3%”, up from “about 3%.”
Management has done a great job positioning the company to grow in an evolving retail landscape.
Earnings are excepted to grow 9% this year and to be down low single-digits next year as the company's investments in growth initiatives like India's Flipkart weigh on profitability.
Strong results and a lid on profitability results in an elevated earnings multiple for the giant retailer.
With a market capitalization just shy of $300 bln, Walmart trades at ~21x EPS, which is a notable premium to most retailers (~16x), Target (15x), and Kroger (14x), but a discount to members-only wholesaler Costco (30x).
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