Walmart's secret weapon may be its appeal with wealthier shoppers

MW Walmart's secret weapon may be its appeal with wealthier shoppers

By Steve Gelsi

Jefferies analysts say 62% of households with $100,000-plus income plan to shop at Walmart during the holidays

It turns out more affluent customers love to save money too, as analysts at Jefferies flagged Walmart Inc.'s appeal to families earning $100,000 a year as a big positive for its stock.

Jefferies analysts on Tuesday reiterated a buy rating on Walmart $(WMT)$, boosted their price target to $111 a share from $105 a share and said the company remains one of their top picks heading into 2025.

The No. 1 reason for this call is Walmart's market share gains with customers with more money in their pockets, analysts said.

A Jefferies survey revealed that 62% of households with incomes of $100,000 or more plan to shop online at Walmart during the current holiday season, analysts said.

"Recently, the majority of WMT's share gains have come from higher-income customers, and we believe this trend will continue ahead," Jefferies analyst Corey Tarlowe said. "We view this dynamic as favorable for WMT ahead."

Other positives around the stock include general merchandise comparable sales, which moved up for the first time since 2022.

"We think an acceleration in discretionary spending could drive upside," Tarlowe said.

Jefferies is expecting Walmart's U.S. comparable-store sales could grow by 4%, well ahead of the Wall Street estimate of 3.5%, he said.

Walmart is also growing its revenue from higher margin business lines such as financial services, advertising, fulfillment services and data monetization, he said.

"WMT should continue to gain wallet share, benefit from improving discretionary spending, and leverage tech, AI, and alt revenue streams to improve margins ahead," Tarlowe said.

Separately, BofA analyst Robert Ohmes on Friday reiterated a buy rating on Walmart and said the company stands to benefit from the scuttled acquisition of Albertsons Cos Inc. $(ACI)$ by Kroger Co. $(KR)$.

"We believe the federal/state court decisions against the merger... imply a favorable long-term competitive environment for WMT in grocery as conventional supermarket peers are less likely (through M&A) to be able to achieve WMT's competitive scale in terms of a national store footprint, buying power, supply chain efficiencies, omni-channel capabilities, and digital advertising potential." Ohmes said.

Walmart's stock was down fractionally in premarket trading on Tuesday.

The stock has risen 80.5% so far in 2024, while the S&P 500 SPX is up by 27.3%.

-Steve Gelsi

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December 17, 2024 07:56 ET (12:56 GMT)

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