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2 Of The Street's Top Retail Analysts Discuss Walmart's Disappointing Q4

2 Of The Street's Top Retail Analysts Discuss Walmart's Disappointing Q4

Walmart Inc (NYSE: WMT) reported Tuesday mixed fourth quarter results, which may have caught some investors off guard given the stock's 10 percent sell-off. Investors and analysts will now be debating if the retail giant's momentum of outsized growth has come to an end or is its earnings report a bump in the road.

The Analysts

Deutsche Bank's Paul Trussell and Jefferies' Daniel Binder.

Trussell: Justified Stock Movement

Walmart's decline is "directly on point" and justified based on its earnings report, Trussell said during CNBC's "Squawk on the Street." Over the past two years, Walmart's stock warranted a premium valuation based on two factors, including outperformance on the top-line versus its peer group, and a "very robust" growth story in the e-commerce business.

Walmart's earnings showed that both of these factors "slipped," he said. Specifically, the retail giant's 2.6 percent growth in same-store sales is "a very good, solid number" but at the same time it's "no longer an outperformer." A 23 percent growth in e-commerce sales is "such a meaningful slowdown" compared to the prior quarter's 50 percent growth.

E-commerce makes up less than 3 percent of total sales, but at some point in the past 12 months Walmart earned a reputation of being "Amazon 2.0 or at least the next best thing." This characterization may now be called into question and there are multiple questions that needs to be answered, Trussell said.

Binder: Q4 Was A 'Little Stumble'

Walmart's management team did cite some capacity issues around peak periods, which may explain the poor e-commerce performance, Binder said during the segment. The company guided towards a 40 percent growth in e-commerce sales in 2019, so if any issues are persisting, management would have adjusted its outlook accordingly in the report.

Walmart's earnings could be described as a "little stumble," he said. Walmart may have lost the retail battle in the quarter, but the company is still winning the war. Specifically, the company added 65 million SKUs to its online store since June and prices remain competitive so investors may see a rebound in Tuesday's "overreaction" stock performance.

The stock was trading around $95.20, down 9.1 percent Tuesday afternoon.

Related Links:

Market's Win Streak May Be In Jeopardy As Dollar Gains, WMT Comes Up Short

Retail Earnings: Home Depot And Walmart To Set The Tone

Photo from Wikimedia.

Latest Ratings for WMT

Feb 2021Morgan StanleyMaintainsOverweight
Feb 2021Morgan StanleyMaintainsOverweight
Feb 2021Raymond JamesMaintainsOutperform

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