By CCN Markets: Walmart is bucking the trend by boosting its fiscal 2019 earnings outlook after reporting strong second-quarter sales.
The bullish projections and the rise in Walmart stock this week underscore that the retail giant is unfazed by mounting recession fears and the US-China trade war.
Walmart’s same-store sales for the second quarter ended July 31 rose 2.8%, beating analyst expectations.
The rest of Walmart’s Q2 results were also healthy. Its strong second-quarter performance was a stark contrast to the weak Q2 sales reported by its rivals Macy’s and J.C. Penney.
Analyst: Walmart shoppers ignore recession hysteria
Moody’s vice president Charlie O’Shea told CNBC that Walmart would likely continue to thrive because its consumers are largely unaffected by stock market volatility and trade tensions.
O’Shea noted that one-third of Walmart shoppers earn more than $100,000 a year, and consumer confidence remains strong. So for now, this segment of shoppers aren’t feeling the squeeze from media-fomented recession hysteria.
O’Shea noted that while the stock market is in flux, “the consumers themselves are still spending.” And obviously, that’s critical to WMT’s bottom line.
“I continue to believe Walmart will set the tone for retail,” says retail analyst at Moody’s Charlie O’Shea. The @SquawkCNBC team reacts to Walmart’s second-quarter earnings beat. https://t.co/Y0BMvQhSvi pic.twitter.com/iC1KaRVIe1
— CNBC (@CNBC) August 15, 2019
‘Distinct bifurcation in retail’
However, O’Shea pointed out that smaller retailers are suffering because there’s a “distinct bifurcation in retail.”
Basically, O’Shea said the big dogs like Walmart are dominating while their smaller rivals are shrinking. And this situation is being exacerbated by rising global financial uncertainty.
“The guys at the top of the food chain are just feasting on the guys at the bottom.”
Amazon rivalry has helped Walmart raise its game
As CCN reported, Walmart has been locked in a heated rivalry with Amazon. In April, Amazon slashed prices on 500 grocery items at its Whole Foods subsidiary in a naked bid to steal market share away from the Bentonville, Arkansas-based retail giant.
WMT reacted by instituting its own price cut to stay competitive with Amazon. The retail juggernaut also upped the ante by offering one-day delivery in an effort to compete with Amazon’s speedy delivery options.
Walmart expects to offer one-day delivery to 75% of the United States by the end of 2019, which includes 40 of the top 50 major U.S. metro areas.
For now, the outlook for Walmart stock looks rosier than ever. A consensus of 10 Wall Street analysts rate WMT a “strong buy” and have set an average price target of $115.
Walmart stock is currently trading near $111. The firm did not immediately return CCN’s request for comment on its FY19 outlook.
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