Research

WMT – Market expectations are for record-high Uniform ROA, but management may be concerned about eCommerce, inventory, and Flipkart

October 6, 2020
  • Walmart, Inc. (WMT:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings with a 29.3x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may be concerned about eCommerce profitability, their inventory levels, and the potential of Flipkart

  • Specifically, management may have concerns about rising labor costs and their current liquidity levels. They may also lack confidence in their ability to sustain membership income in Sam’s Club, accelerate Scan & Go’s market reach, and continue capturing portfolio opportunities. Moreover, they may have concerns about the potential of Flipkart wholesale, as well as the currency and regulatory headwinds surrounding it, and their ability to sustain eCommerce profitability. Management may also lack confidence in their ability to successfully execute curbside rollout and sustain general merchandise performance, food growth, and working capital. Additionally, they may have concerns about the reopening of some of their competitors, the slow performance of their back-to-school products, and the impact of their operating hours on their business. Finally, they may lack confidence in their ability to execute their contingency plans when shopping season comes up