- Wal-Mart is betting big on digital sales
- The company is seeing 5%+ comparable store sales growth in its Neighborhood Market stores
- A strong U.S. Dollar is a net positive for Wal-Mart
Wal-Mart has long been a favorite of The 8 Rules of Dividend Investing. Wal-Mart is the industry leader in discount retail by a wide margin. The company generates more sales than Costco (COST), Target (TGT), Amazon (AMZN), Kroger (KR), and Whole Foods (WF) combined.
Wal-Mart’s dogged focus on controlling costs drives its strong competitive advantage. The company’s scale allows it to pressure suppliers into the best possible deals. Wal-Mart’s established infrastructure and supply chain help keep costs low. Focusing on maximizing the value of customers’ dollars has grown Wal-Mart shareholder’s dollars as well. The company has increased its dividend payments for 41 consecutive years, making Wal-Mart a Dividend Aristocrat.
Wal-Mart Current Growth & Growth Driver Overview
Wal-Mart’s latest results  showed only modest revenue growth of 2.8% versus the same quarter a year ago. Revenue growth by segment is shown below:
- Wal-Mart US: 3.4%
- Wal-Mart International: 1.7%
- Sam’s Club: 2.3%
In addition, the company reduced its diluted share count by 1% versus the same quarter a year ago for total revenue per share growth of 3.8%.  Wal-Mart currently has a dividend yield of 2.2%. The company’s revenue per share growth combined with its dividend yield has given investors a total return of about 6% over the last year, not counting valuation multiple changes. 6% growth over the last year is not particularly impressive, but it is not cause for alarm either.
Wal-Mart reduced its full year EPS guidance from a range of $4.90 to $5.15 to a range of $4.92 to $5.02. This is a reduction of about 1% based on the average of the ranges. Wal-Mart expects a higher tax rate in its fourth quarter than previously anticipated. Despite the guidance reduction, I believe the company’s third quarter results point to recovering operations and long-term growth ahead.
Wal-Mart has suffered from declining comparable store sales in its U.S. segment for much of the last 2 years. This more than anything else has retarded growth. The company’s comparable store sales in the U.S. did increase in the company’s latest earnings release, however. The company’s same store sales in the U.S. were likely due to cuts in food stamp benefits in October of 2013. Amazingly, about 18% of all food stamp benefits are spent at Wal-Mart. The company’s recent comparable store sales increase shows that it has recovered from the food stamp benefit reduction in 2013.
