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- Stocks Gaining Weight Slowly and Steadily: Walmart
Stocks Gaining Weight Slowly and Steadily: Walmart
Walmart stocks (WMT) rose from a $160 area a week ago to its fresh historical highs above $165. Many a mickle makes a muckle, as people say in Scotland. In a similar way, many small daily gains, put together, become a large amount over a long distance. Thus, the share price of Walmart already climbed by more than 10% since the beginning of this summer. The famous chain of discount stores in North America is seen not only a "well-positioned" business, according to the statement of its CEO Doug McMillon, but is a good way to escape inflation headwinds. Walmart is winning retail wars while its rivals from the discretionary consumer sector like Target or Macy's are still losing ground.
The pace of activity growth looks to be the worst in five years, according to a report released by Deloitte. Sales across physical stores and online channels are expected to rise by 3.5% to 4.6% between November and January, compared to a 7.6% increase in 2022. Walmart also said there was a reason to be cautious about the consumer in the second half of the year, owing to the restart of student loans, gas prices creeping back up again and pressure from high interest rates - factors the company said could pressure its profit margins.
As Doug McMillon noted at the 2023 Goldman Sachs Global Consumer Conference, Walmart is "with brick and mortar, with stores and clubs, with curbside pickup and with various forms of delivery", which is enough for the retailer to continue to drive growth. He sees "commonality across the various countries" Walmart operates in, with the consumer environment in the U.S. still "better than he would have expected it to be at the start of the year". So, "things have held up better" than the Walmart CEO would have guessed, while the employment situation, wage increases, and some "pockets" of disinflation are helping the company feel "pretty good about where the consumer is in the U.S." Focusing on pricing, McMillon believes customers "are going to feel some relief" over the next few months as "general merchandise prices are coming down", though food and consumables has gone up, yet many households are choosing cheaper options where they would buy groceries and other goods of daily use. He hopes price pressure will be slightly lower in 2024 compared to 2023.
Therefore, we see target price for Walmart could be moved to at least $175-185 area.
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