Wal-Mart Stores, Inc.: The WMT Comeback Is Just Around the Corner

Calling a spade a spade, the last couple of years have been tough for Wal-Mart Stores, Inc. (WMT) — and by extension, for owners of Walmart stock — as a decade of ill-advised decisions and sloppy execution finally came back to haunt the retailer.

Wal-Mart Stores, Inc.: The WMT Comeback Is Just Around the Corner

Credit has to be given where it’s due, though. While WMT still has plenty of challenges ahead, it finally had a face-the-facts kind of moment, and has since started to become what it should have already been.

That’s not to say everything Walmart is trying it will still be trying a year from now. Indeed, most of the spaghetti the company is throwing on the wall likely won’t stick. Enough of it will though. For the first time in a long time, owners of WMT stock see a light at the end of the tunnel.

Meet the New WMT

In many regards, it could be viewed as a retreat. In fact, that’s what it is. But, the decision to drastically scale back on the number of smaller Walmart Express stores it operates by closing 102 of them is the right one, as it tacitly acknowledges the company realizes it’s not built to compete with smaller-footprint competitors like Family Dollar Stores, Inc. (FDO) or Dollar General Corp. (DG).

Instead, the world’s largest retailer is getting back to its roots. That is, being the best at being big and giving consumers good reason to shop nowhere else.

Case in point: At 25 of its Los Angeles stores, WMT has remodeled in a major way. Gone are the typical Walmart looks from the 80’s … a clinical white tile floor, white walls and white ceiling. Color and a little polish are the new norm. If the new look goes over, look for such overhauls at more stores.

WMT has finally realized it’s time for more than just a cosmetic overhaul though. The company is also embracing sales-enhancing technologies and services it had largely shunned before.

One of those service-oriented technologies is the use of ride-sharing services Lyft and Uber as a means of making home delivery of groceries possible. There’s little doubt the initiative is in response to a similar service now offered by Amazon.com, Inc. (AMZN), though Walmart arguably has the ability to offer a wider selection of groceries to consumers.

However, WMT isn’t just revamping what its stores look like and how they sell things. It’s also rethinking what it sells in each of its stores. In April, the retailer decided it was time to drop the popular Wild Oats brand of organic food — despite the fact that it was something of a draw — because the financial math wasn’t making sense. Some stores have even made point of carrying local soft drinks and locally made beer, catering to local residents.

None of these initiatives (or cancelled initiatives) have been cheap or easy for Walmart. They’ve also failed to revive sales so far, while earnings continue to dwindle. In its most recently completed quarter, the top line only grew from $115 billion to $116 billion, while net income fell from $3.34 billion to $3.08 billion.

Then again, most of these efforts are so new and still so minor that one couldn’t expect to see measurable results just yet. The company is making some much-needed, meaningful changes though. That much can’t be denied.

Bottom Line for Walmart Stock

It admittedly remains tough to make a point of owning Walmart stock. The company has frustrated investors for the last several years with not just bad decisions, but something of a denial of their impact.

It did NOT solve its customer services issues in a timely manner — though it is being fixed now — and the empty-shelves problem should have never happened in the first place. It’s all being addressed though, with at least some measurable results for the effort.

Same-store sales in the U.S. (where the company needs to succeed the most) have now grown for seven straight quarters. And that’s without the benefit of new store looks, local merchandise and grocery delivery.

A combination of shareholder pressure as well as relatively new U.S. chief Greg Foran get a great deal of the credit for the improvements made thus far.

But the company’s still not where it wants to be.

In particular, it has a lot of work to do on the e-commerce front. It will get there though — much like it has in stores. The opportunity for investors is simply that WMT stock is still in that sweet spot where a turnaround is evident, but not yet fully reflected in the stock’s price.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/06/walmart-wmt-stock-comeback-around/.

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