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Walmart Is One Of The Dow’s Worst Performers This Year & It Could Be A Great Buying Opportunity

Walmart Is One Of The Dow’s Worst Performers This Year & It Could Be A Great Buying Opportunity

The retail giant’s stellar earnings report just put Amazon on notice.

It may still be down 10% from its January highs, but Walmart (NYSE: WMT) surged Thursday on news of its strongest sales gain in more than a decade. The gain was fueled largely by its grocery business and increased online orders.

Walmart posted a 4.5% increase in comparable sales at U.S. stores, more than double analysts’ estimates. The company’s grocery sales climbed the most in 9 years as it has improved is fresh-food offerings. Walmart also boosted its forecasts for comparable sales and adjusted profit for 2018.

Charlie O’Shea, an analyst at Moody’s Investors Service Inc., called it “a banner quarter on multiple fronts” in a note to clients. “The food business continues as a bright spot.”

In the past six months, Walmart has been one of this year’s worst performing stocks on the Dow. Over the past month, its price has begun to recover and after today’s earnings release, the stock bounced as much as 11% – the biggest intraday jump since October 2008.

It closed the day up 8%.

Walmart has seen improved consumer sentiment this year and has also benefited from Americans having more money in their pockets as a result of the tax cuts passed late last year.

“We’re pleased with how customers are responding to the way we’re leveraging stores and e-commerce to make shopping faster and more convenient,” said Walmart CEO Doug McMillon. “We’re continuing to aggressively roll out grocery pickup and delivery in the U.S., and we recently announced expanded omni-channel initiatives in China and Mexico.”

Boris Schlossberg, the managing director of foreign exchange strategy at BK Asset Management, is bullish on Walmart and commented to CNBC on Wednesday that Walmart is a long-term buy in his book as it has rebranded itself from being the “cheapest” retailer to being the “least expensive,” a subtle distinction that Schlossberg believes will elevate it in the minds of middle-income consumers.

Additionally, the retailer has improved its inventory, offering better quality branded clothing—it also just inked a new deal with Ellen DeGeneres for a denim line that may drive traffic—as well as better quality groceries. Walmart is also improving its e-commerce with its Jet subsidiary as well as its digitized storefronts for self-checkout.

Walmart’s impressive earnings should be a wake-up call to Amazon (NASDAQ: AMZN) as its e-commerce business, which has been a major focus point for investors, delivered a substantial 40% jump in sales.

Source: Bloomberg.

Walmart has long said that its massive base of stores wasn’t a negative in the global shift toward online shopping. The company has foreseen a world in which shoppers visit brick-and-mortar stores for some purchases, turn online for others, and sometimes do a combination of the two when they buy groceries online and then pick up in store. And so far, Walmart has been right.

The company has been offering in-store and curbside pickup for online orders at 1,800 of its locations for a few years now with great success. Amazon just recently announced that it would be testing curbside pickup of online orders at some of its Whole Foods locations. Such a move indicates that Amazon is conceding that Walmart’s model is a solid one and that brick-and-mortar stores continue to be a valuable part of the grocery ecosystem.

Results like those Walmart reported Thursday certainly send a message to Amazon, and also build a strong case for considering the stock.

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