Walmart (WMT) announced third quarter earnings this week and – gasp! – U.S. same-store sales actually rose for the first time in two years, by 0.5%. Walmart’s smaller neighborhood market stores enjoyed a much healthier 5% rise in same-store sales, and online sales jumped by 21%. All told, not a bad showing.
After years of disappointing news for the world’s largest retailer, this past quarter provided a nice shot in the arm, sending the shares to new all-time highs.
Is Walmart a Growth Story Again?
Not quite. But I do consider it a good stock to own for the next year or more.
I don’t buy the argument that lower energy prices will lead to Christmas shopping spree for American consumers. Christmas is a month and a half away, and fuel prices are just now starting to fall. At this point, it’s too late in the year to make much of a difference. And Walmart has already stated it expects to engage in heavy discounting this year to combat Amazon.com and other online retailers.
Ok …Why Bullish on Walmart?
Frankly, I don’t see too many other places to go in this market. U.S. stocks are expensive, and investors are finally starting to question the ludicrous valuations on the growth and momentum names they previously had given a free pass. Walmart has been hated for years, as has much of the U.S. retail sector. I see investors reappraising Walmart and its discount peers, particularly if GDP growth fails to keep up with the pace of the last quarter.
Walmart is a serial share-repurchaser, and the company has reduced its share count by nearly a quarter over the past 10 years. Walmart also pays a respectable 2.4% dividend.
Go defensive with shares of Walmart. I don’t expect Walmart’s returns to be earth shattering over the next year, but I do expect them to be decent. I can’t say the same for the broader averages.
