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WMT – Market expectations are for Uniform ROA expansion, but management may have concerns about growth, business divestitures, and the omnichannel transition

July 12, 2021

  • Walmart Inc. (WMT:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings with a 27.0x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may be concerned about top-line growth, the impact of their divested international businesses, and their transition into an omnichannel business
  • Specifically, management may lack confidence in their ability to improve top-line growth across higher-growth markets, continue growing grocery market share, and sustain net sales growth, particularly in India and their China Sam’s Club business. Moreover, they may be exaggerating the strength of their first-party retail business and overall U.S. business fundamentals. Furthermore, management may be concerned about the impact of their divested international businesses on net sales, the potential of the American Lighthouses initiative to lower domestic manufacturing costs, and the sustainability of their Canada business performance. Additionally, they may lack confidence in their ability to attract more customers and transition into an omnichannel business