Wal-Mart stock rises to record level

Arkansas Democrat-Gazette - - BUSINESS & FARM - ROB­BIE NEISWANGER

Wal-Mart Store Inc.’s stock rose to a record level Mon­day, con­tin­u­ing a steady climb as the Ben­tonville re­tailer con­vinces in­vestors it will con­tinue to chal­lenge on­line re­tailer Ama­zon.com.

Shares of Wal-Mart stock closed trad­ing at $90.99, up 7 cents from the pre­vi­ous high of $90.92 on Fri­day. It was the fourth straight business day the com­pany’s stock had fin­ished trad­ing above $90 a share.

Brian Yar­brough, a re­tail an­a­lyst with Ed­ward Jones, said the re­cent run to a record level is a sign Wal-Mart has a lot of mo­men­tum as it nav­i­gates a chal­leng­ing re­tail land­scape. Moves like the $3.3 bil­lion ac­qui­si­tion of Jet. com and the de­ci­sion to place the on­line re­tailer’s founder, Marc Lore, in charge of bol­ster­ing Wal-Mart’s on­line pres­ence have paid off.

“I do think over the last few years there’s been this con­cern that they can’t com­pete with Ama­zon and they’re go­ing to strug­gle and there’s not a lot of op­por­tu­nity,” Yar­brough said. “Fast for­ward to to­day — buy­ing Jet.com and with Marc Lore and ev­ery­thing he’s done — I think peo­ple see them as a very for­mi­da­ble No. 2 com­peti­tor to Ama­zon.”

Shares of Wal-Mart stock have climbed more than 30 per­cent since the be­gin­ning of the cal­en­dar year with one of the big­gest surges oc­cur­ring since the com­pany’s an­nual meet­ing with in­vestors on Oct. 10.

Ex­ec­u­tives told in­vestors Wal-Mart ex­pects U.S. ecom­merce sales growth of 40 per­cent in the next fis­cal year and the com­pany would take additional steps to in­te­grate

its on­line and in-store busi­nesses. Wal-Mart also said it would con­tinue to slow the num­ber of new store open­ings and de­vote more of its cap­i­tal to e-com­merce, tech­nol­ogy and store re­mod­els.

In ad­di­tion, Wal-Mart pro­jected earn­ings growth of 5 per­cent dur­ing the next fis­cal year with a net sales gain of 3 per­cent. The com­pany in­tro­duced a new two-year, $20 bil­lion share buy­back pro­gram as well dur­ing the meet­ing, re­plac­ing a pre­vi­ous $20 bil­lion pro­gram that was an­nounced in Oc­to­ber 2015.

“That re­ally helped to quell con­cerns around the com­pany’s abil­ity to grow earn­ings next year,” said Ben Bien­venu, a re­tail an­a­lyst with Stephens Inc. “Not only did they come out and say we’re go­ing to grow earn­ings next year in the mid-sin­gle digit range, but that mid-sin­gle digit range they pro­vided is viewed as a re­spon­si­ble rate

of growth in this com­pet­i­tive en­vi­ron­ment.”

Shares of com­pany stock climbed 4.5 per­cent to $84.13 on Oct. 10, reach­ing what was then a 52-week high.

Wal-Mart’s stock has climbed 13 per­cent since Oct. 9, the day be­fore the meet­ing.

“I think in­vestors are com­ing to re­al­ize that it’s likely Wal-Mart will be a ma­jor player in the fu­ture of re­tail­ing even as it evolves and the price re­flects that,” Bob Wil­liams, se­nior vice pres­i­dent and man­ag­ing di­rec­tor of Sim­mons First In­vest­ment Group, said last week.

Wal-Mart has a his­tory of split­ting its stock when shares climb to record lev­els. Stock splits es­sen­tially dou­ble the num­ber of a com­pany’s out­stand­ing shares and cut the stock price in half. They’re typ­i­cally ap­plauded by share­hold­ers be­cause splits of­ten lead to a run-up in a stock’s price be­cause it be­comes more af­ford­able to small in­vestors.

There have been 11 splits in the com­pany’s his­tory with the last tak­ing place in March

1999, ac­cord­ing to Wal-Mart’s cor­po­rate web­site.

The cur­rent gap be­tween stock splits — 18 years and count­ing — is the long­est in the com­pany’s his­tory.

“It could be an op­tion on the ta­ble,” Yar­brough said. “But it does seem like a lot more com­pa­nies these days like the Googles and the Ap­ples of the world don’t care about it as much.”

For now, Yar­brough said the surg­ing stock is an in­di­ca­tion in­vestors are con­fi­dent in Wal-Mart’s plan and the com­pany has been a safe bet in what has other­wise been a re­tail “waste­land” be­cause of Ama­zon’s dom­i­nance.

But he also re­mains cau­tious about Wal-Mart — which re­ports third-quar­ter earn­ings Thurs­day — mov­ing for­ward.

“They’re still one bad earn­ings, or one earn­ings miss away from be­ing down 10 or 15 per­cent and ev­ery­one go­ing, ‘They’re still a bricks and mor­tar re­tailer,’” Yar­brough said. “But right now they’ve got a lot of mojo.”

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.