On Apr 04, 2014, we issued an updated research report on
Wal-Mart Stores Inc
). The retail giant reported fourth-quarter fiscal 2014 results
on Feb 20.
While Walmart undoubtedly enjoys sound long-term fundamentals
such as a huge scale, geographic and product diversities,
aggressive cost savings and strong international presence, it has
not had the best of times of late. The company delivered weak
results in all four quarters of fiscal 2014.
The biggest retailer's earnings and revenues just managed to
meet the consensus mark in the fourth quarter of fiscal 2014.
Revenues were soft and climbed only 1.5% year over year.
Declining comparable store sales, currency headwinds and a
challenging retail environment in the U.S. as well as in most
international markets due to cautious consumer spending weighed
on the top line and also led to a year-over-year decline in
Walmart has been witnessing sluggish comps in the past few
quarters owing to a weak consumer spending environment.
Middle-class consumers are struggling to cope with rising gas
prices, delayed income tax refunds and higher payroll taxes.
Headwinds including the reversal of the 2% payroll tax cut, a
reduction in government food benefits and severe weather are also
weighing on U.S. comp sales. Walmart is also experiencing
weakness in Mexico, Brazil and China, as a result of which its
international revenues grew a mere 1% in fiscal 2014.
The economic strains in the U.S. and abroad are likely to
pressurize Walmart's low-income shoppers in fiscal 2015. Walmart
anticipates macro-economic headwinds like reductions in
government benefits, higher taxes, tighter credit and higher
group health care costs to impact fiscal 2015 results.
Despite the short-term concerns, we are impressed with the
company's sound fundamentals. Its size and scale of operations
and initiatives to reduce operating expenses make it
The company's significant exposure in the international
markets makes it the largest retailer in the world. Currently,
the company is expanding its reach in Brazil and China by
reintroducing its everyday low price strategy. The company
intends to open 115 supercenter stores and around 270-300
small-format stores in fiscal 2015 in many of the markets,
including the U.S., Mexico and UK.
Walmart's e-commerce business has also been performing quite
well owing to rising demand. Walmart has developed pricing
optimization tools, improved its mobile applications and
developed a new search engine available on its websites. It is
also focusing on developing its fulfillment centers to deliver
U.S. online orders at a lower cost. Walmart expects to grow
global e-Commerce sales to over $13 billion in fiscal 2015, with
continued focus on the U.S., UK, China and Brazil.
However, gloomy consumer spending in the near term, currency
headwinds, inventory concerns and continued economic pressure
keep us on the sidelines. The bribery allegations and complaints
about violating food safety standards in China are also denting
the company's reputation. Walmart currently holds a Zacks Rank #4
However, better-ranked stocks in the retail sector include
Companhia Brasileira de Distribuicao
Foot Locker, Inc.
). While Companhia Brasileira de Distribuicao sports a Zacks Rank
#1 (Strong Buy), Foot Locker and Kroger carry a Zacks Rank #2
COMPANHIA BRASL (CBD): Free Stock Analysis
FOOT LOCKER INC (FL): Free Stock Analysis
KROGER CO (KR): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis
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