Retailer's report
Walmart (WMT) shares on Thursday posted their biggest daily gain since 1 September 2020.
Shares in the company, well behind market growth in 2021 but showing a smaller decline since the start of 2022, jumped 4% on Thursday after reporting for the fourth festive quarter.
Walmart shares are down 4% since the start of the year and have barely budged in the past 12 months, while the S&P 500 index has added almost 12% in the past 12 months and is down 8.1% since the start of 2022.
Walmart's report showed record sales revenues and stronger earnings than market analysts had expected.
The company also increased its dividend by $0.01 to $0.56 per share, while also planning to buy back $10 billion worth of its own shares in fiscal 2023 (ending 31.01.2023).
The report showed that Walmart has been successful in managing supply chain challenges, offsetting not only rising prices for consumers, but also the company's continued Covid-19-related costs and employee pay increases.
Walmart reported supply chain costs in the holiday quarter were $400 million higher than planned, while Covid-related expenses were $300 million higher than expected.
"This is the best result in three quarters," said Michael Baker, analyst at DA Davidson.
Walmart's report shows a strong outlook for both the company's business and its share price valuation. The company said it expects sales growth in fiscal 2023 to be "just above 3%", better than Wall Street's average forecast of 2.7%.
Experts about Walmart
Market analysts say Walmart has a large "financial cushion" to cover inflationary costs while keeping prices low.
Walmart has been aggressively growing its e-commerce sales and delivery business in recent years, also offering a subscription-based service, Walmart's e-commerce sales in the US grew by 90% for the full fiscal year 2022.
According to the latest data from digital marketing firm Chicory, nearly three-quarters of US shoppers have ordered products online in the past 90 days. More than a third of them said they favoured online grocery shopping at Walmart, well ahead of competitors including Amazon (AMZN). However, traditional chains did not make the top five.
BMO Capital Markets analyst Kelly Bania believes that Walmart and Costco Wholesale (COST) stocks are the best choices for investing in food retail, but also singles out Target and Dollar General (DG).
