A recurrent favorite, Wal-Mart Stores Inc. once again ranks among top picks of investing professionals who like the retailer's focus on international expansion and growth of its smaller store formats.
Wal-Mart has instituted several changes in the past few years to increase its top and bottom line, said James Arens II, chief investment officer of The Trust Company of Oklahoma.
These initiatives include initiating aggressive cost cuts by improving global sourcing and reducing transportation costs, aggressive price cuts, expansion of smaller-format stores, and increased focus on growth in international markets, Arens said.
"Wal-Mart has grown aggressively internationally through acquisitions over the past few years. Now that they have acquired thousands of stores internationally in various markets, they are now focused on making those stores more profitable and efficient since they haven't competed in these markets in the past.
"In 2013, approximately 30 percent of Wal-Mart's sales were generated internationally. International growth is still a focus for the company," Arens said.
He cautioned, however, that because much of Wal-Mart's future growth needs to come from international markets, it's important the retailer learns how to compete more effectively in these markets. More than 75 percent of Wal-Mart international stores operate in countries where the retailer has been for more than 10 years. However, returns on those assets have not meaningfully improved relative to the U.S. stores, Arens said.
He noted that during the last recession, Wal-Mart lost market share to dollar stores with more aggressive pricing.
"As a result, Wal-Mart plans to invest $7 billion in price cuts through 2017. We are hopeful Wal-Mart will regain market share from initiating its own aggressive pricing strategy and increased customer convenience from growth in smaller-store formats."
By fiscal 2016, Wal-Mart expects to have more than 500 Neighborhood Markets, accounting for more than $10 billion in sales, said Jim Huntzinger, chief investment officer of BOK Financial Corp.
The retailer also continues to focus on its "made here" platform with a goal of increasing the sales from U.S.-manufactured products by $50 billion over the next 10 years. The company continues to be an attractive large cap holding, Huntzinger said.
In August, the Bentonville, Ark.-based retailer cut its annual profit and revenue outlook for the year after reporting second-quarter results that missed Wall Street estimates.
Wal-Mart Stores Inc.
Address: 702 S.W. Eighth St., Bentonville, AR, 72716-8611
Phone: 479-273-4000
Web: www.walmart.com
Chairman: Samuel Robson Walton
President/CEO: Michael Terry Duke
Symbol (Exchange): WMT (NYSE)
Operation: Operates discount stores, supercenters and neighborhood markets.
Laurie Winslow 918-581-8466
laurie.winslow@tulsaworld.com
Original Print Headline: Growth in smaller stores, global markets appealing
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