By Juveria Tabassum
(Reuters) – Walmart (WMT) shares are poised for their best annual gain in more than two decades as the retail giant’s low prices for daily essentials give it an edge over competitors facing weak demand from price-conscious consumers.
The stock is up about 60% so far this year, outpacing the gain of about 13% in the S&P 500 Consumer Staples sector index, as well as a 21% gain in the S&P 500 Consumer Discretionary index.
Shares of Rival Target are up about 7% this year, while the benchmark S&P 500 (^GSPC) is up 23%.
The stock rose 106% in 1998 as the company expanded its supercenter store format and strengthened its position in Canada and Mexico.
The record jump was sandwiched between a roughly 70% increase in Walmart’s stock price in 1997 and 1999.
“Organic growth combined with a strong balance sheet and low debt levels make Walmart a very popular stock right now,” said Brian Mulberry, client portfolio manager at Zacks Investment Management.
Walmart will report its third-quarter results on Tuesday, Nov. 19, and is expected to show about 4% sales growth and 5% growth in adjusted operating income, according to LSEG estimates.
The retail sector has begun to benefit from investments in its e-commerce and advertising businesses that have helped the company grow its bottom line faster than its revenue.
The company has invested billions in recent years to automate its supply chain to increase inventory of fresh produce in stores and improve delivery times as consumers increasingly prefer the convenience of online grocery shopping.
“Walmart is only expanding its addressable market. Their execution has been great, especially against Amazon, which has not built out its logistics networks like Walmart has in rural parts of America,” said David Wagner, chief equities and portfolio manager at Aptus. Capital advisors.
Walmart has also focused on high-margin revenue streams such as its marketplace and retail media units to support steady demand for lower-priced staples at its supercenters.
Growth in Walmart’s advertising and membership segments accounted for more than 50% of its second-quarter operating income growth, CFO John Rainey said during a post-earnings call in August.
While Walmart’s advertising business, which launched in 2019, is at a much nascent stage than powerhouse Amazon, the grocer has seen strong growth in the unit in recent quarters, outpacing gains on Amazon’s more diverse platform.
(Reporting by Juveria Tabassum; Editing by Aishwarya Venugopal and Devika Syamnath)
