Wal-Mart Store Inc.'s stock rose to a record level Monday, continuing a steady climb as the Bentonville retailer convinces investors it will continue to challenge online retailer Amazon.com.
Shares of Wal-Mart stock closed trading at $90.99, up 7 cents from the previous high of $90.92 on Friday. It was the fourth straight business day the company's stock had finished trading above $90 a share.
Brian Yarbrough, a retail analyst with Edward Jones, said the recent run to a record level is a sign Wal-Mart has a lot of momentum as it navigates a challenging retail landscape. Moves like the $3.3 billion acquisition of Jet.com and the decision to place the online retailer's founder, Marc Lore, in charge of bolstering Wal-Mart's online presence have paid off.
"I do think over the last few years there's been this concern that they can't compete with Amazon and they're going to struggle and there's not a lot of opportunity," Yarbrough said. "Fast forward to today -- buying Jet.com and with Marc Lore and everything he's done -- I think people see them as a very formidable No. 2 competitor to Amazon."
Shares of Wal-Mart stock have climbed more than 30 percent since the beginning of the calendar year with one of the biggest surges occurring since the company's annual meeting with investors on Oct. 10.
Executives told investors Wal-Mart expects U.S. e-commerce sales growth of 40 percent in the next fiscal year and the company would take additional steps to integrate its online and in-store businesses. Wal-Mart also said it would continue to slow the number of new store openings and devote more of its capital to e-commerce, technology and store remodels.
In addition, Wal-Mart projected earnings growth of 5 percent during the next fiscal year with a net sales gain of 3 percent. The company introduced a new two-year, $20 billion share buyback program as well during the meeting, replacing a previous $20 billion program that was announced in October 2015.
"That really helped to quell concerns around the company's ability to grow earnings next year," said Ben Bienvenu, a retail analyst with Stephens Inc. "Not only did they come out and say we're going to grow earnings next year in the mid-single digit range, but that mid-single digit range they provided is viewed as a responsible rate of growth in this competitive environment."
Shares of company stock climbed 4.5 percent to $84.13 on Oct. 10, reaching what was then a 52-week high.
Wal-Mart's stock has climbed 13 percent since Oct. 9, the day before the meeting.
"I think investors are coming to realize that it's likely Wal-Mart will be a major player in the future of retailing even as it evolves and the price reflects that," Bob Williams, senior vice president and managing director of Simmons First Investment Group, said last week.
Wal-Mart has a history of splitting its stock when shares climb to record levels. Stock splits essentially double the number of a company's outstanding shares and cut the stock price in half. They're typically applauded by shareholders because splits often lead to a run-up in a stock's price because it becomes more affordable to small investors.
There have been 11 splits in the company's history with the last taking place in March 1999, according to Wal-Mart's corporate website.
The current gap between stock splits -- 18 years and counting -- is the longest in the company's history.
"It could be an option on the table," Yarbrough said. "But it does seem like a lot more companies these days like the Googles and the Apples of the world don't care about it as much."
For now, Yarbrough said the surging stock is an indication investors are confident in Wal-Mart's plan and the company has been a safe bet in what has otherwise been a retail "wasteland" because of Amazon's dominance.
But he also remains cautious about Wal-Mart -- which reports third-quarter earnings Thursday -- moving forward.
"They're still one bad earnings, or one earnings miss away from being down 10 or 15 percent and everyone going, 'They're still a bricks and mortar retailer,'" Yarbrough said. "But right now they've got a lot of mojo."
Business on 11/14/2017