Written by Juviria Tabasom
(Reuters) – Walmart (WMT) shares are poised for their best annual gains in more than two decades, as the retail giant’s low prices for everyday essentials give it an advantage over rivals facing weak demand from budget-conscious consumers.
The stock is up about 60% so far this year, outpacing gains of about 13% in the S&P 500 Consumer Staples Index, as well as a 21% rise in the S&P 500 Consumer Discretionary Index.
Shares of Rival Target are up about 7% this year, while the S&P 500 (^GSPC) is up 23%.
The stock jumped 106% in 1998 as the company was expanding its department store format and strengthening its position in Canada and Mexico.
The record jump was limited to the rise in Walmart’s share price by about 70% in the years 1997 and 1999.
“Organic growth coupled with a strong balance sheet and low debt levels make Walmart a very popular stock right now,” said Brian Mulberry, client portfolio manager at Zacks Investment Management.
Walmart is scheduled to report third-quarter results on Tuesday, Nov. 19, and is expected to report a roughly 4% increase in revenue and 5% growth in adjusted operating income, according to estimates compiled by LSEG.
The leading retailer has begun to benefit from investments in its e-commerce and advertising businesses that have helped the company grow its operating income at a faster rate than its revenues.
The company has invested billions over the past few years in automation in its supply chain to help stock fresh produce in its stores and improve delivery times as consumers increasingly prefer the convenience of buying groceries online.
“Walmart is just increasing its addressable market. Its execution has been great, especially against Amazon, which doesn’t have its own logistics networks built in rural America like Walmart does,” said David Wagner, head of equity and portfolio manager at Aptus. Capital advisors.
Walmart has also focused on higher-margin revenue streams such as market units and retail media to support steady demand for low-priced basics in its supercenters.
Growth in Walmart’s advertising and membership segments accounted for more than 50% of operating income growth in the second quarter, CFO John Rennie said on a post-earnings call in August.
While Walmart’s advertising business, which launched in 2019, is at a much more recent stage than powerhouse Amazon, the grocer has seen strong growth in the unit over the past few quarters, outpacing gains made by Amazon’s more diversified platform.
(Reporting by Goveria Tapasom; Editing by Aishwarya Venugopal and Devika Simnath)