Reuters
- Walmart has been renewing efforts to offer discounts on its best-selling products, which could help it support its share price - for now, according to a Credit Suisse analyst.
- Walmart disappointed investors when it reported a slowdown in e-commerce sales growth last quarter.
- View Walmart's stock price in real time here.
Walmart has started to double down on its "Every Day Low Price" strategy, signaling a shift in focus to discounts on its best-selling products in order to increase sales. That strategy has largely paid off.
The retailer has made significant "price investments" - the term coined for retailers that accept lower margins in order to maintain a competitive advantage - in its mass product channels. Since then, Walmart has seen stronger unit growth in its mass market products, which was likely boosted by lower prices that attracts consumers, a Credit Suisse analyst notes.
However, the focus on its mass market products means there will be an increasing reliance on this channel for driving revenue compared to other channels, which have seen its prices accelerate. The company will also likely see "a slight moderation" in total sales growth as prices decline more than units increase.
Retailers have had to contend with a trade off between not only absorbing the costs, but also improving their margins when they offer steep discounts for their most popular products. However, a big company like Walmart, with a market cap of $266 billion, should be able to manage given its scale.
"We see WMT's price actions driving stronger share," Credit Suisse Analyst Seth Sigman wrote in a note, "but at a cost, consistent with our estimates, which along with valuation is what keeps us on the sidelines."
Sigman's price target for the retailer was $102 per share, around 16% above its current level though he maintained his "neutral" rating.
The company faces the challenge of maintaining robust online sales growth after reporting it slowed to 23% in the fourth quarter - down from 50% the previous quarter.
The company has undertaken several initiatives to give its e-commerce segment a jolt, which includes finalizing its acquisition of Jet.com, investing in other online retailers, expanding its same-day delivery service, and filing a patent to create an online grocery shopping service that mimics the functions of the popular dating app Tinder.
Walmart's stock was trading at $88.10 per share on Thursday, down 11.04% for the year.
