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Wal-Mart Can Hold Its Own Online

With its strong distribution network, penetration into expensive categories, and solid sales trends, investors should expect Wal-Mart to be a competitive force in the e-commerce landscape.


Ken Perkins: Wal-Mart's (WMT) shares have fallen by 30% this year, primarily because wage increases and e-commerce investments are weighing on profit growth. With earnings expected to decline 6% to 12% next year, investors are understandably concerned about how much Wal-Mart will need to invest to generate sales growth going forward. These concerns are understandable, but we think many investors underestimate Wal-Mart's ability to compete in e-commerce over the long term.

There are three main considerations that make us like Wal-Mart: First, we think that Wal-Mart has the distribution network and store footprint to fulfill online orders at competitive prices, especially in rural areas where e-commerce economics are less favorable. 

Ken Perkins does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.