A Walmart World? Morgan Stanley Likes Walmart's Approach To Global Operations

Walmart Inc WMT’s global presence gives it some advantages it's using wisely as it plots a strategy for growing profit in the changing retail industry, Morgan Stanley said in raising its price expectations on the stock.

The Analyst

Morgan Stanley’s Simeon Gutman raised Walmart's target price from $113 to $115, while keeping an Overweight rating on the stock. He said management meetings last week in Europe highlighted how Walmart is bettering its operations in three ways.

1. Global Insight

The company has a unique advantage because of its global footprint, which gives it perspective on how retailing is evolving in many places, while many competitors have only local information, Gutman wrote. Walmart is able to take what it learns about fulfillment, data usage, and e-commerce product curation, for example, in various locations and expanding those insights worldwide.

2. Balanced Outlook

Gutman said Walmart is managing its international business to balance medium-term results with long-term investments, similar to how it has run Walmart and Sam’s Club in the United States. It’s made several moves to divest from markets and businesses that aren’t key to its overall strategy, an approach that’s paying off in strength in key markets like China and India, which are expected to major drivers of growth.

3. Live Debates

Several internal, ongoing debates are happening in the company about the right strategy for a retailer as the business increasingly moves online, Gutman wrote. While some companies may react to changes, Walmart is proactively debating how big its e-commerce marketplace should be, how much it should offer in next-day delivery, and where the payments industry fits into Walmart’s strategy.

Gutman came away from meetings with Walmart executives more confident in Walmart’s ability to grow profits, he said, citing “consistent top-line growth driven by share gains across key categories.”

Price Action

Walmart shares traded around $108.96 on Monday. The stock is higher by 31% over the past year.

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Photo credit: Walmart Corporate from Bentonville, via Wikimedia Commons