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Walmart Inc WMT

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Soft End to Fiscal 2021 Does Not Change Our Long-Term View of Walmart; Shares Seem Rich

Zain Akbari, CFA Equity Analyst

Analyst Note

| Zain Akbari, CFA |

Wide-moat Walmart’s fourth-quarter results fell short of our expectations, leading to $5.48 in full-year adjusted diluted EPS versus our $5.59 target, but our long-term view is intact, as we attribute the shortfall to transitory factors. An adjustment for the time value of money should largely offset the impact on our valuation, so we do not expect our $124 fair value estimate to change significantly. We assume a low-single-digit sales growth rate and 4%-5% adjusted operating margins over the next decade. Despite a mid-single-digit percentage decline in the shares on the news (more pronounced than our reaction, likely due to our greater focus on Walmart’s long-term prospects rather than the progression of the pandemic-era sales surge), we suggest investors await a more attractive entry point.

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Company Profile

Business Description

America’s largest retailer by sales, Walmart operated over 11,400 stores under 54 banners at the end of fiscal 2021, selling a variety of general merchandise and grocery items. Its home market accounted for 78% of sales in fiscal 2021, with Mexico and Central America (6%) and Canada (4%) its largest external markets. In the United States, around 56% of sales come from grocery, 32% from general merchandise, and 10% from health and wellness items. The company operates several e-commerce properties apart from its eponymous site, including Flipkart and (it also owns a roughly 10% stake in Chinese online retailer Combined, e-commerce accounted for about 12% of fiscal 2021 sales.

702 Southwest 8th Street
Bentonville, AR, 72716
T +1 479 273-4000
Sector Consumer Defensive
Industry Discount Stores
Most Recent Earnings Jan 31, 2021
Fiscal Year End Jan 31, 2020
Stock Type Classic Growth
Employees 2,300,000