Walmart in an Age of Coronavirus

Walmart (NYSE: WMT) is prospering in the Age of Coronavirus. Interestingly, both investors and customers are turning to the discount behemoth to survive the pandemic.

Noticeably, Walmart’s share growth has experienced moderate growth since the beginning of 2020 and the pandemic. In detail, Walmart started 2020 at $118.94 on 2 January 2020, rose to $132.33 on 16 April 2020 and fell to $124.60 on 15 May 2020.

Mr. Market and investors have new faith in Walmart, a company pundits have been dismissing for some time. Customers, on the other hand, have never deserted Walmart.

Walmart still beats Amazon in Revenues  

Walmart reported quarterly revenues of $141.671 billion on 31 January 2020. In contrast, Amazon (NASDAQ: AMZN) reported quarterly revenues of $75.452 billion on 31 March 2020. Amazon also reported quarterly revenues of $87.437 billion on 31 December 2020.

Therefore, Walmart is still the revenue leader in retail. However, Amazon is rising fast. Stockrow reports Amazon’s revenues grew at a rate of 26.39% in the quarter ending on 31 March 2020. However, Walmart’s revenues grew at a rate of 2.07% in the same quarter.

Impressively Walmart’s online sales grew by 37% during the fiscal year ending on 31 January 2020, Digital Commerce 360 estimates. In addition, Walmart’s online sales grew by 35% between November 31, 2019, and 31 January 2020. Thus, Walmart’s sales grew by 35% during holiday season 2020.

How Walmart is cashing in on coronavirus

Walmart Stores Inc. (NYSE: WMT) is well-positioned to cash in on coronavirus. Walmart operated 3,200 stores with grocery pickups and 1,600 stores that offer grocery delivery in January 2020, Digital Commerce 360 estimates.

Consequently, Walmart can supply families with essential supplies, and groceries in a minimal contact environment. In addition, Walmart launched same-day pickup at its Sam’s Club membership stores in 2019.

Other efforts that can help Walmart prosper in a pandemic include the increased use of robots and automation in its stores. Walmart is deploying robot stock checkers on its sales floors and truck unloading systems in its backrooms. Robots and automated systems are not susceptible to coronavirus.

Additionally, I think Walmart is developing management artificial intelligences (AIs) that could replace human managers. Notably, Walmart is experimenting with AI in its Intelligent Retail Lab (IRL) on Long Island. The IRL is a Walmart Neighborhood Market where AI monitors customer behavior and stock levels in an attempt to improve customer service.

Walmart and coronavirus

The coronavirus has been costly for Walmart. Walmart will pay associates $935 million in coronavirus bonuses, Supermarket News claims.

Those bonuses will have a minor effect on Walmart’s bottom line because the company had $9.465 billion in cash and short-term investments on 31 January 2020. However, Walmart will face pressure to raise pay and issue more bonuses as the pandemic drags on.

News reports show coronavirus is disrupting Walmart’s operations. For example, Walmart closed three Massachusetts after employees because of COVID-19 infections, WCVB TV reports. They reopened all three stores after third-party sanitizing and employee testing.

Will COVID-19 Close Walmart?

The Tri-County Health Department closed a Walmart supercenter in Aurora, Colorado, after three coronavirus deaths, CNN claims. A Walmart employee, her husband, and a security guard died from coronavirus in April.

Tri-County charged Walmart employees were not wearing masks or enforcing social distancing at the store. Three Aurora Walmart associates tested positive for the COVID-19 virus.

Hence, Walmart is at risk from closed stores and coronavirus panics. However, Walmart’s same-store sales increased by 20% in March, The Wall Street Journal claims.

Personally, I have noticed Walmart’s online ordering, delivery, and pickup have been functioning smoothly in Colorado. In fact, I received most of my last Walmart order in just three days. However, I noticed Walmart was not shipping some basic items including chewable vitamins and skin lotion in April.

Yet, Walmart’s website showed those items in stock and available for pickup. That was problematic for me because I live over 50 miles from the nearest Walmart.

Is Walmart Making Money?

Walmart reported a $33.923 billion gross profit and an operating income of $5.322 billion for the quarter ending on 31 January 2020. In addition, Walmart reported a common net income of $4.141 billion for the same quarter.

The financial numbers reveal Walmart is a cash-rich company. For example, Walmart reported a $10.716 billion quarterly cash flow on 31 January 2020. However, Walmart reported an $884 million ending cash flow on the same day.

Thus, Walmart makes money from its business but less money than Amazon. Dramatically, Amazon (NASDAQ: AMZN) had $49.292 billion in cash and short-term investments on 31 March 2020. Therefore, Walmart’s largest direct competitor has nearly five times more cash.

Can Walmart Survive Coronavirus?

On the negative side, Walmart could need to borrow to finance expansion and coronavirus response. Notably, Walmart reported $32.437 billion in debt and $79.711 billion in total current liabilities on 31 January 2020.

On the positive side, I think Walmart can generate enough cash to pay those debts. Thus, I conclude Walmart has the resources to survive coronavirus.

I believe Walmart will thrive in the pandemic because its stores offer pickup and offer household essentials and groceries at low prices when many people are struggling with collapsing income. Statista estimates Walmart operated 11,501 stores worldwide and 4,756 stores in the United States in April 2020.

Therefore, I think there is a lot of room for expansion for Walmart’s pickup and delivery programs. Consequently, Walmart could make more money from delivery and pickup.

Additionally, I think they could use many Walmart stores as local and regional fulfillment centers for delivery efforts. Hence, I see a lot of room for growth at Walmart, as many of its competitors keep their stores closed.

Is Walmart a Good Stock for the Coronavirus Age?

Walmart (NYSE: WMT) stock is cheap when compared to Amazon. Walmart shares were trading at $124.60 on 15 May 2020. Mr. Market paid $2,375.02 for Amazon (NASAQ: AMZN) on the same day.

Unlike Amazon, Walmart pays a dividend. Walmart paid a 54₵ biannual dividend on 10 December 2020.

Overall, each Walmart share offered a dividend yield of 1.75%, an annualized payout of $2.16, and a payout ratio of 43.81% on 15 May 2020. Impressively, Dividend.com credits Walmart with 45 years of dividend growth.

I think Walmart is a wonderful value investment with a high margin of safety. Ultimately, I think Walmart is an excellent investment because I believe it will survive coronavirus and make money.