Maybe Walmart Can Hold a Candle to Amazon

WMT stock - Maybe Walmart Can Hold a Candle to Amazon

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Walmart (NYSE:WMT) released its second-quarter 2019 results August 16 before the markets opened. Investors responded enthusiastically to the news, pushing WMT stock up nearly 10% so far.

Can it last?

Before I answer that question, let me run down some of the highlights of the quarter.

  • Analysts were expecting revenue of $125.97 billion; Walmart delivered $128.03 billion.
  • Analysts were expecting adjusted earnings per share of $1.22; Walmart delivered $1.29.
  • Analysts were expecting U.S. same-store sales growth of 2.4%; Walmart delivered 4.5%, its best number in more than a decade.
  • Walmart grew U.S. e-commerce revenue by 40% in the quarter; it expects to hit 40% for the entire fiscal year.
  • Grocery pickup is now available in more than 1,800 stores.

CEO Doug McMillon is very optimistic about the company’s omnichannel future and said as much in its earnings release.

“We’re pleased with how customers are responding to the way we’re leveraging stores and e-commerce to make shopping faster and more convenient,” CEO Doug McMillon said. “Customers tell us that they feel better about the current health of the U.S. economy as well as their personal finances. They’re more confident about their employment opportunities.”

Good economy, better shopping experience, stronger business, higher WMT stock price.

Were There Any Negatives in WMT Stock Earnings?

Like any earnings report, if you want to find negatives, you will.

The company lowered its sales guidance for stores outside the U.S. from 3% growth in fiscal 2019 excluding foreign exchange to 0.7% as a result of several divestitures including its majority ownership of Walmart Brazil.

The other disappointment in Q2 is the 3.7% decline in operating income to $5.75 billion from $6.0 billion in the same quarter a year earlier. Although Walmart’s U.S. business had a strong quarter, its international business saw operating income, excluding foreign exchange, drop by 20.4% in the quarter to $1.2 billion.

Other than those two, it was a pretty healthy quarter.

Can Walmart’s Success Last?

In July, I highlighted the reasons why I thought Walmart can’t hold a candle to Amazon (NASDAQ:AMZN). At the end of the day, for me at least, it all comes down to Prime.

Paraphrasing Scotty from Star Trek, “Walmart’s giving her all she’s got, Captain,” but it’s still not enough to keep up with Jeff Bezos and company. Yet.

“Retailers of all sizes, including Walmart and Amazon, are working hard to figure out the last mile. The Walmart vs. Amazon debate when it comes to this critical piece of the e-commerce puzzle is still very much up in the air,” I wrote July 18. “Walmart clearly understands that it has got to use its brick-and-mortar footprint to its advantage in much the same way Best Buy (NYSE:BBY) has done in electronics.”

The company’s Q2 results demonstrate that online and off, Walmart’s business — at least in the U.S. — is doing just fine. In fact, with grocery delivery gaining traction across the country, I think it’s doing better than fine.

Is it enough to break Amazon’s back?

No, it surely isn’t, but if you own WMT stock or are considering buying it, your opinion about the company today is likely much more positive than it was yesterday.

And that’s a very good thing.

As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

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