By Senad Karaahmetovic
Oppenheimer analyst Rupesh Parikh has made changes to the firm’s Top Pick ranking in the sector of Food Retailing/Discounters.
Walmart (NYSE:WMT) is no longer seen as a Top Pick at Oppenheimer “given risks in rightsizing inventory in the current retail backdrop and given the potential for increasing consumer pressures as the year progresses.”
The call is made after store checks in Northern NJ that resulted in “very high levels of markdowns in the apparel category.”
“In addition, we found aggressive rollbacks in apparel, seasonal, and other GM categories. Finally, we noted heavy inventory levels in certain categories such as grills, pools, etc. Based on our observations and recent developments on the discretionary retailer front, we believe there could be risk on NT gross margin delivery,” Parikh told clients in a note.
The analyst added that Walmart could offset this headwind with cost controls and stronger grocery share gains.
Parikh also named Costco (NASDAQ:COST) and Dollar General (NYSE:DG) as new Top Picks.