- Walmart has been renewing efforts to offer discounts on its best-selling products, which could help it support its share price – for now, according to a Credit Suisse analyst.
- Walmart disappointed investors when it reported a slowdown in e-commerce sales growth last quarter.
- View Walmart’s stock price in real time here.
Walmart has started to double down on its “Every Day Low Price” strategy, signalling a shift in focus to discounts on its best-selling products in order to increase sales. That strategy has largely paid off.
The retailer has made significant “price investments” – the term coined for retailers that accept lower margins in order to maintain a competitive advantage – in its mass product channels. Since then, Walmart has seen stronger unit growth in its mass market products, which was likely boosted by lower prices that attracts consumers, a Credit Suisse analyst notes.
Retailers have had to contend with a trade off between not only absorbing the costs, but also improving their margins when they offer steep discounts for their most popular products. However, a big company like Walmart, with a market cap of $US266 billion, should be able to manage given its scale.
“We see WMT’s price actions driving stronger share,” Credit Suisse Analyst Seth Sigman wrote in a note, “but at a cost, consistent with our estimates, which along with valuation is what keeps us on the sidelines.”
Sigman’s price target for the retailer was $US102 per share, around 16% above its current level though he maintained his “neutral” rating.
The company faces the challenge of maintaining robust online sales growth after reporting it slowed to 23% in the fourth quarter – down from 50% the previous quarter.
The company has undertaken several initiatives to give its e-commerce segment a jolt, which includes finalising its acquisition of Jet.com, investing in other online retailers, expanding its same-day delivery service, and filing a patent to create an online grocery shopping service that mimics the functions of the popular dating app Tinder.
Walmart’s stock was trading at $US88.10 per share on Thursday, down 11.04% for the year.