Walmart developements

I like to monitor the stocks that I have in my portfolio. One of my most interesting buys and with great result so far is Walmart. This Retail giant is a company with a great dividend and growth history. The company started with a single store and grew into the supermarket behemoth it is today. However, the growth stagnated in the recent years mainly because Walmart missed the boat on internet sales. To turn the tide the management of Walmart created a plan with a couple of highlights:

  • Improve in store experience for customers
  • Improve internet sales

Walmart raised the minimum wages and invested in employee training with the purpose of getting better personal to help with the customer in store experience. The company also invested into the stores itself. Besides that the company invests in its internet platform which must be the catalyst for future growth.

 

2017 Results

Today Walmart published its 2017 year figures. I believe the year figures are important because the plan to turn around Walmart is underway for a couple of years now and now we should be able to see the first result. Therefore I waited with impatience at the publication. I believe Walmart investors are not disappointed with the latest results.

  • Total revenue grew 0,8% to 485,9 billion. Excluding currency effects total revenue grew 3,1%.
  • Operating income was 22,8 billion, a decrease of 5,6%. Excluding currency effects the decrease is 2,9%.
  • Operating Cash Flow is 31,5 billion of which 14,5 billion was returned to shareholders in the form of Dividends and Share buybacks.
  • For the next fiscal year Walmart expects Earnings Per Share to be around 4,20 to 4,40 which is in line with this year diluted EPS of 4,32.
  • Free Cash Flow grew from 15,9 billion in FY2016 to 20,9 billion in FY2017. This is attributable to a higher Operating Cash Flow and lower CAPEX.
  • US e-commerce grew 36%.

It looks to me that the company is on schedule with its turn around. The net income declined 7,2%, but this is mainly due to the higher salary costs which should help to boost future growth. I certainly like the growth in e-commerce. It looks like the company is on the right track although they really started to late which results in a big disadvantage compared to Amazon.

 

Conclusion

I believe Walmart is a company with a bit more risk then it used to have. Mainly because the company started to late with e-commerce which results in a big disadvantage mainly compared to Amazon. However, the company has a great Cash Flow and management has a lot of experience and a good plan for the future. This leads me to believe tha the company is on the right track and that they can certainly deliver shareholder value in the future. Add to that the great price I paid for my shares and I believe the risk is minimal and the rewards can be quite nice.

I will stay long on Walmart. We see what the future brings, but for now the company keeps paying me a nice dividend and although the growth of the dividend is lacking I expect that the growth will increase again within 1 or 2 years from now.

 

Do you have Walmart in your portfolio? How do you think about the future of this company? And do you believe the company is on the right track? Leave your comments below!

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