I can’t help but be amazed at how Walmart (WMT) keeps getting it right, time and time again.
Its latest savvy move is its newest marketing campaign, “The Real Walmart,” which aims to put to rest the stereotype of the Walmart shopper.
Walmart executives want you to know that WMT shoppers come in collars of all sorts — teachers and accountants, firefighters and mechanical engineers — and are merely driven by a like desire to save money. It also drives across the message that the company provides benefits to a huge swath of constituencies.
To borrow a phrase, the campaign’s tone is “What’s good for Walmart is good for America.”
Similarly, what’s good for Walmart is good for your pocketbook. And I think that’ll stand in perpetuity.
The company’s recent shareholder meeting was dotted with stats that provoke double-takes. For instance, WMT’s most recent full-year revenues of $447 billion were more than double the combined revenues for that year of Costco (COST), Target (TGT), Dollar General (DG), Family Dollar (FDO) and Dollar Tree (DLTR), which make up the bulk of the entire discount-store world.
But what really helps set Walmart apart isn’t big factoids, or even just big scale — but its ability to adapt and innovate at a nimble pace over such a long period of time despite its size.
A good for-instance is WMT’s reach into the mobile space. Walmart’s app uses its GPS-powered “geofencing” feature to sense when you are in the store, and it uses Walmart’s huge database of customer shopping pattern information to generate shopping lists for customers. App users can query the system for prices and specials on merchandise, and you can use its voice feature to ask for items within a specific budget.
Also, to continue improving margins (and the “green” PR probably doesn’t hurt), Walmart recently installed eight solar voltaic arrays on stores in Massachusetts — part of its program to put solar power in 1,000 of its facilities by 2020. To date, it’s installed solar panels in more than 200 of its facilities.
It’s this eye fixed on the future that helps make Walmart a perpetually attractive long-term holding.
CFO Charles Holley pointed out during the meeting that during the past 20 years, Walmart is the only Dow Jones component to grow revenues, profits and earnings per share each year … and the company is on its way to continuing the streak. Fiscal first-quarter 2014 revenue improved 13% year-over-year, while earnings ticked up 5%. Walmart estimates another 5% increase in FY 2014 revenues, and expects EPS to grow 18% to $1.88 per share.
That’s not to say there won’t be some hurdles in the way, however.
The aforementioned discount retailers aren’t going away (in fact, most are growing), nor are etailers like eBay (EBAY) and Amazon (AMZN), which are plenty innovative, themselves. For example, Amazon’s “lockers” idea was so good, Walmart aped the concept, and its grocery-delivery program has had enough success that it’s expanding the service to Los Angeles.
Additionally, continued weakness in the economy is taking its toll, as first-quarter same-store sales declined in the U.S. for the first time since summer 2011; Walmart blamed this on the payroll tax increase and delays in IRS tax refunds. Margins are being squeezed, and growth in its foreign markets was up just roughly 1% in the latest quarter.
But even then, I still think Walmart can maintain its lofty financial streaks and continue enriching shareholders over the long haul — not just via its thoughtful planning, but also its willingness to dig into the vault.
Walmart has made a quarterly payout since March 1974, and has improved that payout by 18% on average during the past decade, leading to a current yield of 2.5%. And considering WMT is only paying out 31% of its earnings in the form of dividends — on par with the current S&P 500 average and well below the historical mark of 50% — WMT has plenty of head room for future increases.
Walmart also is actively repurchasing stock as part of a $15 billion buyback program announced during the shareholder meeting. That follows $36 billion in stock repurchases during the past four years.
The bottom line is that while revenues might slow a bit and earnings are under some pressure, all’s still relatively well at Walmart, especially when looking at the long-term — which again, WMT excels at.
If you ever wanted a “forever” holding, you could do worse than a market leader that hasn’t stopped adapting.
Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing, he did not hold a position in any of the aforementioned securities.
