Walmart turns up the heat on Amazon rivalry

New York Post

Oct 10, 2017

The sleeping giant appears to be waking.

Walmart on Tuesday said online sales are expected to spike 40 percent in 2018 — on top of a 60 percent gain in the three months ended July 31.

The news, plus the announcement of a $20 billion share buyback plan, sent stock in the discounter up 4.5 percent, to $84.13, on Tuesday — a new 52-week high.

The Bentonville, Ark., chain, the world’s largest retailer, was slow out of the gate in reacting to Amazon’s amazing growth, but then bought for $3 billion in August 2016, which enabled it to jump-start its online operations.

“Several years ago, Walmart was on the defense and reacting to Amazon,” said Edward Jones analyst Brian Yarbrough. “But fast forward to today after buying, bringing in Marc Lore and Doug McMillon: Everything has changed, and Amazon is now reacting to some of the things Walmart does.”

Over the last 12 months, Walmart shares are up 24 percent compared with Amazon’s 17 percent rise.

The last three months have more clearly spotlighted Walmart’s momentum. Walmart shares are up 15 percent, while Jeff Bezos’ Amazon has seen its shares dip 1 percent over the past three months.

“The brand perception of Walmart — aided by last year’s Jet acquisition along with multiple investments to build out its digital ecosystem — has improved dramatically, which could have a significant impact on its ability to draw in more millennial shoppers in the years to come,” wrote Gordon Haskett analyst Chuck Grom in a research note.

As part of an effort to step up its ability to compete with Amazon, Walmart is looking to exploit its brick-and-mortar presence and said during Tuesday’s investor day that it expects to add 1,000 locations for shipping online grocery orders during its fiscal year ending in late January 2019.

It currently ships online orders from more than 900 US locations, it said.

Walmart forecast profit for fiscal year 2019 to rise about 5 percent over the expected adjusted earnings of $4.30 to $4.40 per share for the fiscal year ending January 2018.

“They are losing less money than they lost last year, but the only reason they will grow earnings is from share repurchases,” Yarbrough said. “They are still not profitable and at some point profits matter.”