(MENAFN- The Peninsula)
The Washington Post
Bentonville: Walmart's shares have surged 82%, adding roughly $340bn to Walmart's market value this year. Compare that to many of its peers. Shares in Dollar Tree Inc. and Dollar General Corp., which should have also benefited as the Economy cooled and shoppers hunted for bargains, have slumped more than 40%. Walmart has outperformed rival Target Corp. and other retail heavyweights like Amazon Inc. and Costco Wholesale Corp. too.
Looking ahead to 2025, analysts and investors anticipate that Walmart will continue to set itself apart from its retail peers. They're betting that further market-share gains and increased profit contributions from Walmart's higher-margin ancillary businesses will extend the stock's rally.
At Laffer Tengler Investments, senior analyst Jamie Meyers expects Walmart to once again outperform consumer staples stocks next year. The firm boosted its Walmart position earlier in 2024.
“Walmart is deserving of this premium valuation, and frankly, it could go higher,” said Meyers.“The company's in a good position. Certainly with the valuation it has now, they're going to have to keep up the work.”
A number of retail stocks struggled this year as Americans continued to focus their spending on necessities and shied away from discretionary purchases, pressured by years of elevated inflation and interest rates.
But for the Bentonville, Arkansas-based retailer, which sells mostly household essentials, those trends worked in its favor.
As this year's top performer on the S&P 500 Consumer Staples Index, Walmart has fueled nearly half of the index's 15% advance.
Its stock chart“looks more like something that's technologically oriented,” said Keith Buchanan, senior portfolio manager at GLOBALT Investments.
“It has the growth and margin expansion that some names in the tech sector envy.”
Higher-income consumers have turned to Walmart in recent years as they searched for bargains, and the company's convenient delivery options, revamped stores and wider product assortment have helped it gain traction with wealthier shoppers. Households earning $100,000 or more per year made up roughly 75% of Walmart's market-share gains in the third quarter, the company said in a November call with analysts.
“Walmart is just in the sweet spot right now,” Buchanan said.
While GLOBALT has trimmed its position in Walmart this year given its rally, Buchanan said he still expects shares to outperform the broader market in 2025.
Disappointing earnings reports from the dollar stores and Target in recent months have already demonstrated Walmart's success is disrupting the retail industry. Citigroup Inc. analyst Paul Lejuez anticipates Walmart will continue to take share from dollar stores as it builds awareness of its delivery options and its Walmart+ Assist program, which allows consumers who qualify for government assistance to join Walmart+ at a discounted rate. Meanwhile, Walmart's store remodels, which offer an improved shopping experience for apparel, home goods and beauty products, and enhanced pet departments, could hurt Target and pet suppliers, he said.
“Walmart's been our top pick for almost three years now, and we have not moved it out of that number one spot,” said Lejuez, who has a buy rating on shares. A further acceleration in general-merchandise sales could fuel“the next leg of excitement” for the stock, he added.
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