There is a lot of dispute right now about what products or merchants are essential during the coronavirus pandemic. But there’s no dispute over Walmart (NYSE:WMT) — and that has all eyes on WMT stock.
Walmart is the center of the virus storm. The company is hiring like mad as 10% of employees are on leave. Starting April 20, all employees will be required to wear facemasks at work, even senior executives. Just wearing a mask while shopping is exhausting.
Investors are giving Walmart stock a lot of love for its efforts. The shares are up 11% so far in 2020. This despite Walmart still not being a growth company. Its first-quarter numbers, due out May 19, are expected to show revenue of $127 billion, up 3% from a year ago, and lower earnings.
Fly the Flag for WMT Stock
The sales estimate may be low. The Wall Street Journal reports that Walmart stores saw a 20% jump in sales during March. With about 150,000 employees out on leave, the company has quickly hired replacements from a pool of 1 million applicants. Most of the new workers were laid-off from restaurants and hotels. It plans to add another 50,000.
Walmart has 400 stores in China and got through the pandemic there in good shape. But in the U.S., it faces a myriad of local laws on what it can sell, many of them being changed on the fly. The company is also having to limit traffic in the stores as shoppers ignore social distancing rules.
Before the pandemic, I criticized Walmart for ramping up pick-up capacity. I was wrong. This has become vital during the crisis. The stores now have special pick-up hours for seniors and first responders. Online sales have doubled.
Last August I called Walmart hamburger priced like steak. Since then shares are up by 25%. I’d call that filet mignon, but the move is rational with so many other companies failing. Walmart shares did drop 12% in the early days of the pandemic. But they have since recovered.
The New Normal
Unlike with previous crises, like hurricanes, the pandemic is not going to be over soon. It will be over when it’s over. If Americans continue to ignore social distancing rules, if a second or third wave of infections hit, this could last until 2022.
That means Walmart is going to have to define the new normal. That means reducing how often merchandise is touched. It means negotiating with health experts who want to keep people from going inside stores at all. It means negotiating with local governments on uniform policies of what it can sell, and how. With no national leadership on issues impacting daily life, Walmart must become a de-facto government entity.
Walmart employees are starting to die from the virus. One family has already sued Walmart, claiming it ignored a worker’s symptoms.
Many smaller grocers have closed. Walmart is more essential than ever, even if its stores are a vector for the virus.
The Bottom Line
Walmart was already a virtual downtown in many towns. Now it’s the whole town.
Walmart must stay open because curbside pick-up doesn’t scale. Shoppers looking for the service must wait days for their orders. People on food stamps aren’t allowed to buy online at all.
These are huge challenges but also opportunities. Walmart is picking up market share during the pandemic. It will probably retain much of that share afterward. It is ramping up contacts with local government. It will need those connections to fight anti-trust enforcement afterward.
For Walmart stockholders, and for Walmart management, these are both the best of times and the worst of times. Shares are fully priced but are likely to hold their value.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of the environmental thriller Bridget O’Flynn and the Bear, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story.
