Walmart(NYSE: WMT) embarked on its humble discounted store journey to blossom into a titan in the retail realm. Yet, history shows us that previous giants like Sears and Toys R Us fell into the abyss of bankruptcy, urging investors to look beyond the laurels of yesteryears. It’s time to delve into Walmart’s core fundamentals for a lucid evaluation.
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Consistent Cost-Leadership Strategy
From its inception, Walmart lived by a straightforward mantra: slash costs and share the spoils with shoppers through everyday low prices. Over the years, its sheer size has allowed it to wield immense bargaining power with suppliers, enabling perpetual offering of the best deals in town. With a colossal customer base of 255 million weekly visitors crowding its 10,500 stores and online platforms, Walmart managed a 4.9% surge in adjusted revenue during fiscal year 2024, propelling operating income up by 10.2% sans currency volatility. Though the profit growth might not be meteoric, Walmart’s robust investment strategy hints at a promising horizon.
Dynamic Evolution
Expressly proactive, Walmart’s management refuses to let complacency creep in, especially with fierce giant Amazon breathing down its neck. The retail juggernaut continuously spruces up its omnichannel prowess, offering same-day pickup across various locales and rolling out Walmart+, a subscription service packed with perks like free shipping, fuel discounts, and streamlined checkout paths. In the online arena, business boomed as fourth-quarter e-commerce sales skyrocketed by a staggering 23% to hit the $100 billion milestone. Investing vigorously, Walmart also dabbles in the advertising realm, with sales reaching $3.4 billion, marking an impressive 28% uptick year-on-year – with a recent move to acquire Vizio, a television manufacturer poised to boost this segment.
Dividend Delights
Loyal Walmart shareholders rejoice annually as the board dishes out heartening dividend increments. Recently, a 9% lift in dividends was declared, extending the streak to a remarkable 51 consecutive years, cementing Walmart’s status as a revered Dividend King. With a robust free cash flow of $15.1 billion, the dividend payouts remain well-supported, comfortably overshadowing the $6.1 billion earmarked for shareholders last year. Sporting a 1.4% dividend yield, Walmart stands solid in rewarding its faithful investors.
The Verdict
Despite an impressive 24% spike in share price over the last year, Walmart flaunts a more attractive valuation, with its price-to-earnings (P/E) ratio sliding from 36 to 31, a notch below the S&P 500’s 29 P/E multiple. Although profit growth might taper off this year, the enticing blend of soaring dividends, pioneering measures, appealing valuation, and unwavering customer magnetism positions Walmart as a compelling prospect for discerning investors.
Is Walmart a wise investment at this juncture?
Before plunging into Walmart stocks, here’s food for thought:
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, sits on The Motley Fool’s board of directors. Lawrence Rothman, CFA, holds no positions in the mentioned stocks. The Motley Fool endorses and holds positions in Amazon and Walmart while abiding by a transparent disclosure policy.
The expressed views of the author are personal and do not necessarily mirror Nasdaq, Inc.’s perspective.
