Walmart Starts the Year on Down Note

Retail

Published: February 15, 2020 8:35 am

Last Updated: February 15, 2020 8:36 am

Shares of Walmart Inc. (NYSE: WMT) are down 1.18% to $117.44. It is among the worst-performing Dow Jones industrial stocks. The index itself is higher by 3.01% to 29,398.08. The move in Walmart stock may be a reaction to worries about retail in general.

Walmart will suffer due to the coronavirus in China. The country is one of Walmart’s largest markets. The spread of the disease shows no sign it will abate. That means some Walmart stores could be shuttered for weeks.

Walmart’s earnings may be less than stellar. The holiday season in the United States was shorter than usual. This may trigger poor comparisons to 2018. Although investors should overlook this factor because it is driven by the calendar, they may not. The anticipation of rocky results may be why short interest in Walmart surged in the most recent period.

Walmart also has to deal with the “Amazon effect,” which has dogged it for over a decade. Results of Walmart’s e-commerce division will be carefully scrutinized. Even if this part of the company is growing, total revenue from it will be dwarfed by Amazon’s fourth-quarter 2019 numbers. While strong growth will be good news, a direct comparison will be wanting.

Walmart has tried to combat Amazon’s strength. It lets people order products and food online and then pick them up at one of Walmart’s stores. This should be a convenience. Walmart does not break out the numbers, which makes it impossible to decipher whether the results are good.

While Walmart’s results often top those of other retailers, it cannot escape the drop in same-store sales of many of its competitors. Results from smaller companies in the industry are often relentlessly lower. Among the exceptions is Walmart’s most direct competitor: Target. This should spark some enthusiasm that size means something, at least in retail.

Now, all investors have to do is wait a few days to find out how Walmart is really doing.

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