Moreover, with more than 50% of Wal-Mart’s customer base equipped with smartphones, it has already seen significant growth in the number of people using the app on their devices while shopping in the store.
The company has made calculated moves to ensure that its customer base with smartphone access expands, thereby enhancing sales. This is good news not just for the company, but also for investors. Sales are already improving, showing a positive sign of growth. Moreover, the company has plans to open 27 new stores in the remainder of the financial year, including Builders Warehouse stores in Botswana and Mozambique.
A look at its peers
Best Buy Co., Inc. (NYSE:BBY), one of the major competitors of Wal-Mart, recently reported average first-quarter results. Although reported net income was 58% lower compared to the same period last year, it did report $0.32 a share better than the estimates of $0.25 a share. Like Wal-Mart, Best Buy’s same-store sales in the U.S. dropped 1.1%, simply because the company failed to attract customers.
The company has cut down its expenses by $175 million since March of this year. Although Best Buy Co., Inc. (NYSE:BBY) seems underrated compared to Wal-Mart, its stock price has more than doubled in the last 15 months. Undoubtedly, it has returned more than 50% in the last one year, but it won’t be a wise decision if you still believe to hold on to the stock expecting future gains.
Wal-Mart still has a lot to learn from veteran online shopping company Amazon.com, Inc. (NASDAQ:AMZN). As per Amazon.com, Inc. (NASDAQ:AMZN)’s latest financial results, growth slowed from last year although revenue rose 22% to $16 billion. The main reason being the company’s heavy investment in cloud computing technologies to create newer avenues of growth. The company’s recent acquisition of Goodreads (a social network for books) will definitely provide a social angle to Amazon’s website, thereby bringing in additional customers and readers.
It has a huge cash pile of $7.9 billion, allowing it to make such acquisitions and investments as and when required. It also has a very high P/S ratio of 1.92 compared to its peers. Nevertheless, owing to Amazon’s extremely strong fundamentals and efficient management, investors are willing to wait for profits while the company invests in growth. This makes me believe that the stock is overpriced and definitely not trading cheap at the moment, but looks sustainable in the long run.
Foolish takeaway
Wal-Mart did produce a lackluster quarter, but for a company so huge, well established, and ever so growing, a bad quarter doesn’t make much of a difference. When you look at the bigger picture, the company still has a lot to offer.
“Wal-Mart’s mission is simple and focused — to help people save money so they can live better. I’m confident about our long-term strategy and the direction Wal-Mart is headed. Our balance sheet is strong, and we continue to grow.” said Mike Duke, Wal-Mart Stores President and Chief Executive Officer.
The company’s plans also sound quite promising. It has recently received confirmation from the Indian government to enter the country’s multi-brand retail. The company expects to deliver EPS for Q2 between $1.22 and $1.27, compared to $1.18 last year. It has deployed cash to grow their business and return value to shareholders. During the first quarter, Wal-Mart repurchased approximately 30 million shares for $2.2 billion. In addition, the company paid $1.6 billion in dividends.
