Walmart Stock Is Still a Buy Despite Global Turmoil (WMT)

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Wal-Mart Stores, Inc. (WMT) grabbed headlines last week when it announced the closure of 269 stores worldwide, 154 in U.S., with the expectation that 16,000 workers globally (10,000 of them in the U.S.) will go with the stores.

Walmart Stock Is Still a Buy Despite Global Turmoil (WMT)The immediate reaction was one of concern that the discount retail giant had overextended itself and was now desperately slashing operations to save itself. The story is more complicated than that.

First, WMT’s move should be an encouraging sign. Too often, massive companies like Walmart avoid making big decisions like this until its too late. They do a little of what has to be done, hoping the environment will change and they won’t have to execute the worst-case scenario.

Will Store Closures Affect Walmart Stock?

Some of this is for self-preservation in the ranks — fewer stores and workers can change the entire structure of the operations and management structure.

Given the logistics of a company the size of Walmart, you don’t want to have to sort all that out continually. It takes away from productivity.

But the fact is, Walmart saw that the global economy wasn’t recovering and that the U.S. economy is far from bustling and decided to take significant action. Walmart is closing 60 stores in Brazil where it hasn’t been able to effectively compete and now the country is in an economic meltdown. In the U.S., it’s closing 90% of the stores that are within 10 miles of another store.

However, considering Walmart operates 11,600 stores in 28 countries, 4,100 stores in the U.S. and employs 2.2 million people, its closures barely move the needle.

Walmart has been grappling with how to pay workers a higher wage in a contracting or at best, stagnant economic environment. This seems like the solution that worked on every level.

What got less press was WMT’s announcement this week that it’s increasing wages for 1.2 million of its workers. Given the economic circumstances, some workers had to pay to help the herd. It was a hard, but smart business decision.

And that is one reason why Vetr, a crowd-sourced stock rating service upgraded WMT from “buy” to “strong buy” this week.

Walmart stock is actually up year to date, even after the massive selloffs. There are few companies linked as closely to the global consumer economy that can say the same.

Also don’t forget that Walmart stock is sporting a 3.1% dividend at current levels. Even if the stock treads water — which isn’t likely — you will land a nice inflation-beating return while you wait for the economy to reignite.

There’s a lot less to like on the global economic horizon than there was just two months ago, but Walmart has done a very good job of being proactive and preparing itself for the volatility and uncertainty that are so prevalent today.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/01/walmart-stock-price-wmt/.

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