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Analysis of Walmart Inc

Analysis of Walmart Inc

14 September 2022

Walmart: growth in slow steps

Walmart is one of the largest retailers in the USA. The key business model is the ADLP strategy, daily low prices. Walmart is represented in 24 countries of the world, receives about 230 million customers weekly and consistently occupies one of the market niches.

In June, Walmart’s share of the food retail market in the United States was 21%, despite the fact that in January it did not exceed 17-18%.

Walmart is currently operating in fiscal year 2023 and expects adjusted earnings per share to decrease by 9-11%, but revenue will grow by 4.5% year-on-year. Profitability will decrease slightly, but here the business is absolutely objective from the point of view of assessing the conjuncture. The sale continues in the chain of stores – the company gets rid of excess stocks of clothing, shoes and electronics. The Christmas sales period may be quite effective this season, if the pandemic component does not interfere.

The strong position of the business in the sales segment will become even stronger against the background of rising inflation in the United States. In the data for the second fiscal quarter, this was clearly visible: revenue increased by 8.4% YoY, while sales expanded by only 2.4% yoy. Betting on e-commerce is an absolute plus.

The risk is the same rise in inflation. The acceleration of consumer prices, which is visible this year, has a downside for business. The population can switch to a savings model of behavior, and then consumption will shift to other categories of retail – less profitable. At the same time, Walmart will not be able to keep prices low for a long time, as the cost of goods increases. The company will gradually shift these costs onto the shoulders of buyers, which may stimulate them to search for even more profitable offers from competitors.

The consensus forecast for Walmart shares for up to 9-12 months is $145-150.

On the daily chart, the MACD indicator moves up in the positive zone and confirms the buy signal. The Stochastic oscillator is growing in the positive zone and is preparing to enter the overbought area, the buy signal remains in force.

    14 September 2022
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