Walmart’s Strong Performance Outshines Dollar Tree, Dollar General, and Big Lots

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Walmart’s Retail Supremacy

Walmart, a giant in the retail industry, stands tall while other discount retailers face hurdles. Its ability to attract a diverse customer base and its focus on groceries have contributed to its impressive performance.

Bright Prospects for Walmart

Analysts are optimistic about Walmart’s future. They anticipate a 3% earnings growth this year, with a promising 10% increase expected next year. In contrast, Dollar Tree, Dollar General, and Big Lots grapple with declining earnings and sinking stock prices as lower-income consumers tighten their spending belts.

Walmart’s Recent Performance

Walmart recently experienced a measured pullback in its stock price, following a record high of $165.85 on September 13. Although the stock dipped by 2.02% in the past week, the lower-than-average trading volume indicates that investors were merely capitalizing on profits after a significant rally. Over the last three months, Walmart’s stock has performed admirably, showing a 5.20% increase.

Market Impact and Walmart’s Position

Additionally, the broader market context plays a role in understanding Walmart’s performance. The S&P 500, represented by the iShares Core S&P 500 ETF (NYSEARCA: IVV), experienced a 1.43% dip in the past month and a 0.43% decline over the past three months. While Walmart carries substantial weight as the 26th most heavily weighted stock in the S&P 500, it typically requires significant news related to the broader economy to influence the index significantly.

Walmart’s Grocery Dominance

Let’s delve into how Walmart compares to its discount retail counterparts. In its latest quarterly report, Walmart reported growth in grocery and health and wellness sales, surpassing expectations in general merchandise. The company also highlighted substantial revenue growth in its e-commerce and Walmart Connect advertising platform.

While total sales and earnings showed sequential declines, they maintained single-digit year-over-year increases. Analysts foresee a 3% earnings increase for Walmart this year and an impressive 10% boost in the following year.

Dollar Tree’s Struggles

In contrast, Dollar Tree faced a 43% earnings decline in its most recent quarter, despite an 8% revenue growth. CEO Rick Dreiling acknowledged that customers’ shopping habits were reverting to pre-pandemic patterns, with reduced spending on discretionary items. This shift in consumer behavior has led to a significant 25.41% drop in Dollar Tree’s stock price this year.

Walmart’s Steady Earnings

Unlike its counterparts, Walmart has maintained consistent earnings in recent years, making it a reliable performer in the retail industry.

Dollar General’s Challenges

Examining Dollar General’s earnings, we observe a decline in growth over the past two quarters, with the company significantly missing analysts’ expectations. The decline in same-store sales can be attributed to reduced in-store foot traffic, causing Dollar General’s stock to plummet by 55.61% year-to-date.

Big Lots’ Financial Struggles

Big Lots has encountered challenges of its own. The company cited financial difficulties among its lower-income customer base, who are tightening their budgets. Additionally, a major supplier’s unexpected closure resulted in a decline in furniture sales.

With a staggering 64.42% decline in its stock price this year, Big Lots currently holds a consensus “reduce” rating among analysts. Its downward trajectory shows no signs of reversal, making it an unattractive investment option.

Diverse Customer Base Benefits Walmart

The disparity in performance between Walmart and other discount retailers can be attributed to company-specific factors. Walmart and TJX Companies Inc. (NYSE: TJX) boast a broad customer base across different income levels, rendering them less susceptible to the spending fluctuations of lower-income customers.

Furthermore, middle-income and affluent consumers, who have reduced discretionary spending without eliminating it entirely, are turning to Walmart for groceries and household items. This strategic emphasis on groceries has proven advantageous for Walmart, particularly as more people opt for home-cooked meals over dining out.

A Promising Outlook for Walmart

Analyst ratings for Walmart reflect a “moderate-buy” sentiment, with a price target of $177.17, offering a potential upside of 9.13%. Walmart’s recent pullback of 1.39% in the week ending September 22 found support at its 21-day moving average, positioning it 1.4% above its 50-day line.

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