Competition from e-commerce doesn't seem to be bothering Wal-Mart. "The arrival on the market of Internet companies like Amazon, with their advantages in terms of costs and home delivery, seemed to have put an end to the traditional large-scale retail sector," explains Ken Perkins, an analyst at Morningstar who on the stock it has a five-star rating with a target price of $75 versus $61 today. “Wal-Mart has responded by investing in online commerce and opening smaller outlets alongside department stores.”
The group (the largest in the world in large-scale distribution thanks to annual sales of around 450 billion dollars), meanwhile is trying to increase revenues deriving from its international operations (outside the US it is particularly strong in Mexico) and from customer loyalty. “The strategy it is applying abroad is similar to the one it followed in the United States (increase revenues by optimizing expenses and investments to sell goods at the lowest possible cost, Editor's note)”, continues the analyst.
"However, competition is very strong and the economies of scale it can obtain are lower than those achieved in the USA". Perkins' estimates speak of a 2% growth in profits in the medium-long term. "In absolute terms it doesn't seem like a big increase, but if you take into account the growth in labor costs, then it is a satisfactory result," explains the analyst. Wal-Mart stock has a competitive advantage (Economic Moat by Morningstar) judged "Large" compared to its competitors thanks to the advantageous prices it has managed to extract from suppliers and the economies of scale it has created over time.
Attachments: Source: Morningstar.it
