Wal-Mart (WMT) Strategic Initiatives On Track In Virginia

Wal-Mart Stores, Inc. (NYSE:WMT) shares have rallied 10.7% in the past one year, outperforming the Zacks categorized Retail-Supermarkets industry’s gain of 6.7%. We believe there is ample potential, which is quite evident from its Value score of ‘A’ and Growth score of ‘A’, and VGM Score of ‘A’.

What further makes us optimistic about its performance in the near term is its low beta of 0.11 and long-term earnings growth rate of 6.1%. Further, Wal-Mart posted positive earnings streak for the seventh consecutive quarter, including the recently reported first-quarter fiscal 2018 results.

Wal-Mart has been taking several initiatives to understand the evolving needs of customers to regain their confidence and boost sales. It has delivered positive comps in the U.S. in the last 11 quarters. Moreover, traffic improved for the 10th consecutive quarter, owing to the company’s efforts to modernize stores for higher footfall and improvement in consumer spending.

Wal-Mart is also making huge investments in e-Commerce initiatives to compete with the biggest online retailer, Amazon.com (NASDAQ:AMZN) . In this regard, the company continues to make huge investments in e-Commerce initiatives, including acquisitions. The company has undertaken three e-Commerce acquisitions, since the buyout of Jet.com, U.S. e-Commerce company, in Sep 2016. The Jet.com acquisition was a major step toward accelerating its online business. It offered customers a massive online marketplace where they can purchase items at discounted prices. In fiscal 2017, the retail giant has also invested $2.7 billion for training and paying higher wages to U.S. associates.

Specifically, Wal-Mart foresees growth prospects in Virginia, where the company has over 44,000 associates. In Virginia, the company has 152 retail units and also sells online through Walmart Grocery Pickup, Walmart.com and Jet.com.

The company has opened its first Walmart Training Academy in Virginia and has trained more than 715 associates through the Academy program till date and also awarded bonuses to successful candidates. In regard to its commitment to hire military veterans, the company has hired more than 5,000 veterans in Virginia since the launch of the Walmart Veterans Welcome Home Commitment in May 2013. Further, in fiscal 2017, Walmart and the Walmart Foundation invested more than $37 million in cash and in-kind contributions to non-profits throughout Virginia.

For fiscal 2018, Wal-Mart plans to open three new stores/clubs across the state, which will add approximately 700 jobs in Virginia. The company also expects to invest substantial amount of money in remodeling its existing stores in more than 18 locations across the state.

Despite the company’s efforts to boost sales and regain investors’ confidence, it still faces many headwinds, which are likely to affect earnings in the near term. Higher e-Commerce investments, declining international sales and currency headwinds are expected to impact the results negatively.

Zacks Rank and Key Picks

Wal-Mart currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the retail sector are The Children’s Place, Inc. (NASDAQ:PLCE) and Sequential Brands Group, Inc. (NASDAQ:SQBG) . While Children’s Place sports a Zacks Rank #1 (Strong Buy), Sequential Brands carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Children’s Place has expected long-term earnings growth of 8.0%, whereas Sequential Brands has expected long-term earnings growth of 15.0% for the next three to five years.

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