The global retailer, which was once lumped in as just another Amazon victim, is winning in its fight back against the e-commerce behemoth. Sales growth is positive, e-commerce sales are sizzling, and operating expenses are coming out of the system. Earnings growth is stable in the 5% range. Strategic initiatives such as online grocery are playing out well.
All in all, the Walmart growth story is back. Walmart once again stands on its own two feet as a global retail giant that is gaining market share.
WMT stock is back, too. It’s at all-time highs and has rallied nearly 25% year-to-date.
But WMT stock’s valuation is rich, much richer than it’s been in recent memory. So should you chase the momentum or fade the rally?
The Walmart Growth Story Is on Fire
Recent quarterly numbers have underscored that Walmart is successfully putting up a fight against Amazon. Traffic is trending up, leading to positive comparable sales growth. E-commerce sales have been growing in the 60%-plus range, and earnings are largely up after a period of continued declines.
As such, WMT stock has slowly been creeping up after its massive selloff in 2015.
But what has finally pushed WMT stock to all-time highs is guided numbers which underscore that growth this year is much more than just a blip. It’s the new trend.
Sales growth is expected to be 3% or more in 2019. Sales are only up 1.7% so far this year, so the 3%-plus guide is quite bullish and indicates that the Walmart growth story will only get better.
That 3% sales growth will be powered by robust e-commerce growth. E-commerce sales growth in the U.S. is expected to be about 40% next year. That growth will lap roughly 60% growth this year, so on a 2-year basis, Walmart’s e-commerce growth is quite impressive.
All told, the pedestrian sales growth coupled with some operating expense leverage and share buybacks (WMT announced a new $20 billion share repurchase program) will drive 5% earnings growth in fiscal 2019.
All signs point to that 5% earnings growth staying into the foreseeable future. Walmart is really building out its digital game, expanding into new markets like online grocery, and illustrating that it has the scale and know-how to continue to grow even in a dynamic retail landscape.