There’s no denying that retail is a hard business to be in. Or at least today it is. Consumers are beyond fickle when it comes to tastes and preferences for goods. But that aloofness doesn’t stop at what brand of shoe is in or what fragrance is in their detergent. It’s also in how consumers purchase goods in the first place. They want it in store AND online.
And luckily for retail kingpin Walmart (NYSE:WMT), it’s quickly becoming an omnichannel giant.
We’ve already gotten a taste on how WMT has moved quickly into both online sales and improving its store experience. But with its latest earnings coming up fast, omnichannel will be the hot topic and drive the show. And there’s a good chance investors will like what they see.
Walmart Builds on Its Past
You don’t have to look far to see the effects of Amazon (NASDAQ:AMZN) and other online retailers are having on traditional brick-and-mortar stores. Even mighty Walmart felt the effects a few years ago when it saw its sales sink for the first time since it went public. But unlike a Toys R Us or a PacSun, WMT has a very deep war chest to combat the problem.
And so far, it has done pretty well in the fight against AMZN and others.
Over the last couple of years, Walmart has unveiled a variety of new apps, in-store logistics upgrades, online deals and a massive buying spree of several major commerce properties. This included cult-following outdoor retailer Moosejaw, Millennial pants/clothing retailer Bonobos and low-price algorithm-heavy Jet.com. These moves, as well as efforts to improve shipping and execution at Walmart.com, have seriously worked well for WMT.
Last reported quarter, e-commerce sales rose 33% versus a year earlier. This follows a 23% and 50% gain for the fourth and third quarter of 2017. That’s some pretty impressive growth. But the key for Walmart versus Amazon could be its network of over 11,000 retail locations.
As we said before, a mobile, website and in-store shopping experience is what a modern consumer wants these days. It’s why Amazon purchased Whole Foods — to give it store frontage. The advantage for WMT is that it already a massive network of locations. And it’s using them to give it a major foothold over AMZN.
Walmart has already begun online grocery and pick-up options. Here, consumers can shop online, pay for their items and then head to the store for delivery. In order to speed up the process, Walmart has begun testing using robots for the actual selection of items and is unveiling a different warehousing format at several of its stores. If successful, it could cut the wait time consumers have before they pick-up their items in half. At the same time, WMT tech incubator has recently unveiled a new text/iMessage ordering system dubbed Jetblack. Consumers can simply send a text for forgotten items and they’ll be entered into the automated ordering system.
Then there is Walmart’s meal kit aspirations. These prepackaged kits of fresh ingredients and directions for preparation have taken on a new life with Gen X and Millennial consumers. But they also fit into WMT’s plans for quicker execution. It’s much easier for a robot to snag one off the shelves than grab the items separately — and Walmart can charge a few bucks more for the convenience.
This is just the beginning as the retailer has continued to innovate with 3D shopping, one-day shipping programs and even streaming video.
Boosting Earnings at Walmart
None of these things on their own seem like a big deal for the world’s largest retailer, but they really are. And more importantly, they add up to omnichannel dominance and giving today’s fickle consumer what they want, when they want it.
Over time, this should help WMT on the earnings and revenue front.
There’s no secret that analysts and traders are going to be focused on the online sales number when Walmart reports next week. It seems to be what really moves WMT stock these days. However, for longer-term investors, it’s more important to focus on all the revenue breakouts WMT gives. It’s not strictly just about online, but “bricks and clicks.” Has Walmart executed across its entire omnichannel ecosystem? That information may not come out until its conference call or earnings slides. But its vastly more important that only focusing on online sales. This is where WMT’s true advantage comes from and makes it a great long-term holding.
I suspect that the numbers will be pretty good on this front. Last quarter, the firm saw significant momentum in its efforts to be the omnichannel leader.
Buying Walmart Shares
Given its huge size and expertise in omnichannel retailing, WMT stock could be a big buy heading into earnings. The best play could snag some now and some after it reports. How the stock will fair on reporting day depends on what analysts think of the growth in online sales. But for longer-term investors, the focus should be on the total package. It’s not going to be just clicks, but how those clicks translate into sales in-store as well.
When it reports, you may get a real gift, if analysts aren’t impressed by the online-only sales. Ignoring that noise and looking at the bigger picture is key. And that picture should be very nice indeed. All in all, Walmart is quickly becoming the top player in retail.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.