This post was originally published on this site
Walmart says customers are filling their shopping carts with more items.
Getty Images
Walmart Inc. WMT, +1.59% shoppers are making fewer shopping trips, but filling their baskets with more items, according to executives at the retail giant.
“Consistent with the second quarter, we saw customers consolidate shopping trips with larger baskets and fewer transactions,” said Doug McMillion, Walmart’s chief executive, on the Tuesday earnings call.
McMillon said it’s one more way that the coronavirus pandemic is changing consumer behavior, with increased online shopping another trend. Walmart reported 79% growth in e-commerce sales.
“We think these new customer behaviors will largely persist and we’re well positioned to serve customers with the value and experience they’re looking for,” McMillon said in a statement.
The number of transactions for Walmart U.S. during the fiscal third quarter fell 14.2% but the average ticket rose 24%.
See: Walmart CEO congratulates President-elect Biden during earnings call
The result differs from Target Corp. TGT, +3.26%, which reported more trips and bigger baskets in its third-quarter earnings on Wednesday.
Analysts are upbeat about Walmart’s progress online, particularly in the company’s ability to bring down the cost of doing digital business.
“[W]e are encouraged by the continued progress on narrowing the U.S. e-commerce’s operating losses,” wrote Raymond James analysts led by Bobby Griffin.
“More importantly, we believe the fundamental drivers behind the improved e-commerce performance (better product mix, higher volume, marketplace growth, etc.) can be maintained going forward and e-commerce operating income should continue to improve.”
Operating income was up $1.1 billion for the quarter, and adjusted operating income rose 16.4% on a constant currency basis.
Raymond James rates Walmart stock outperform and lifted its target price to $165 from $145.
Also: Amazon Pharmacy poses a risk but CVS could be up for the challenge
“For 4Q, we believe Walmart is better positioned than many retail peers to sustain digital momentum and minimize supply chain risks as Walmart does have its own massive private trucking fleet, is able to leverage inventory and fulfill from ~2,500 stores, and has been able to open more fulfillment center capacity,” wrote Cowen analysts led by Oliver Chen.
Cowen rates Walmart stock outperform with a $170 price target, up from $160.
Not all analysts are as optimistic.
“We are concerned about the investments into the business limiting operating profit growth, the potential impact on profitability from recent initiatives to lower prices, and an increased level of sales from the lower-profit e-commerce division,” wrote Edward Jones analysts.
“Longer term, we believe e-commerce will never reach the same level of profitability as stores, which will limit earnings growth.”
Edward Jones rates Walmart stock hold.
Don’t miss: Farfetch says luxury shopping has permanently moved online, shares jump
Still others think Walmart is setting itself up well for now and into the future.
“It’s not taking up its grocery prices as much as some traditional competitors,” wrote UBS analysts led by Michael Lasser. “We think this will pay dividends, as it comes alongside initiatives that can help Walmart gain greater wallet share over time (e.g. its value proposition makes Walmart+ more attractive.”
Walmart didn’t give an update on Walmart+ because it was only launched in September.
UBS rates Walmart stock buy with a $165 price target, up from $148.
Walmart stock has rallied 27.5% for the year to date while the Dow Jones Industrial Average DJIA, -0.43% is up 3% for the period.
