Walmart Inc "A Spark-y: Takeaways from Meeting with Management" (Buy) Lasser

Research evidence excerpt

Walmart Inc "A Spark-y: Takeaways from Meeting with Management" (Buy) Lasser

even more appealing to the universe

of 3P sellers.

A key question the market has been debating is what WMT plans to do with the

increased profits its 2nd P&L will generate. Importantly, it retains optionality in how

to approach it. It believes its current price gaps allow some level of 2nd P&L profits

drop to the bottom line. Yet, if it sees an opportunity to capture market share by

reinvesting some of the profits into pricing, it likely will take the opportunity to do

so.

Success in gen mech continues to be a great story for the retailer. Notably, some of

the headwinds discussed on 1Q's earnings call appear to have subsided as

seasonal categories have recovered with improving weather. The growth in gen

merch, particularly in fashion & beauty, provides another accelerant for the

company's 2nd P&L. It is enabling WMT to reach new, higher income customers

and drive traffic to its marketplace. This increases the value of real estate in WMT's

marketplace and drives higher ROAS for its advertising partners.

Lastly, the retailer is beginning to see positive returns from its technology

investments. Drone deliveries are scaling rapidly, reaching >500k deliveries in 1Q.

As the program expands, WMT can further widen its lead in convenience and

delivery speed. Plus, its digital shelf initiative is progressing well. With ~50% of

stores touched, the company is seeing productivity gains and improvements in

employee morale. It plans to roll out digital shelves to all stores in the US by the end

of the year. It can then pass on efficiency gains back to customers.

WMT continues to invest in prices, but remains within plan

Although retailers are increasingly taking price action, WMT believes the pricing