For years, Walmart (NYSE: WMT) has been the big dog in retail. When it burst onto the scene and offered the lowest prices around, other retailers shuddered. As long as Walmart didn’t open a store in their area, all was good.
But Walmart began expanding and by not taking action, many of the discount retailers from when I was growing up are all falling into extinction. I’m looking at you Kmart and Ames.
But a funny thing happened. The internet took off and a little company with a big vision started to chip away at the perch Walmart was sitting in.
Soon, Walmart was facing many of the issues that other retailers faced years before.
It has been a few years now since Amazon has been knocking down Walmart and they know if they want to survive in the world alongside Amazon, they need to get proactive. Otherwise they too will fall into extinction.
So today we are going to walk through the journey of Walmart and see if the moves the company is making is enough to survive and make you money as an investor.
Walmart Is Here To Stay
I’ll let the cat out of the bag early and tell you that Walmart isn’t going anywhere. Even with retailers worrying about Amazon getting into the grocery business, the retail space is big enough for more than just one player.
The reason why Walmart is here to stay is simple. They currently run over 11,000 stores and these stores are within 5 miles of 70% of the population. In other words, shopping at Walmart is simple and convenient.
And with this close proximity, they can offer grocery deliveries to shopper’s homes with ease.
But they know that the internet is a whole different ball game. That is why the company is investing so much time and energy into getting this right.
The first move in this regard was to buy Jet.com. This was a startup that was rivaling Amazon and was a great move for Walmart.
Because of this move and others, Walmart recently reported a 60% increase in online sales during its second quarter.
And the company isn’t done yet.
They continue to pour more money into their online presence. For example, they too offer free 2-day shipping on orders over $35. All other orders arrive in 3-5 days. On top of this, you can return purchases you make online to any physical Walmart store or mail it back.
The Future For Walmart
While they have started to make moves in the online space, they are not done and are projecting sustained growth. For example, they estimate that online sales will increase an additional 40% for the next fiscal year. Part of this will be online grocery sales.
And speaking of earnings, earnings per share came in at $1.08, beating by $0.01. Revenue hit $123 billion, up 2%, also beating estimates.
Then there is the dividend. The stock is currently yielding 2.6% and they have increased the dividend for 44 straight years. The growth rate of the dividend alone is 5%.
In all, Walmart is doing what it needs to do in order to be a force against Amazon. It is not simply going to allow itself to get run over by the online retail giant.
And based on the earnings, the company is succeeding at this plan.
I think the future is very bright for the company and would consider getting in the stock before the holiday retail numbers are released. I think this retail season will be a good one and expect the best retail stocks to pop after numbers come about later in the season.
This author has no positions in any stock mentioned and does not plan to open any positions in any stocks mentioned for at least 72 hours after publication of this article.