What To Expect From Wal-Mart’s 2017 Holiday Sales
The holiday season in the U.S. (November-December) is the busiest time of the year for retailers. Despite the widespread lull in the retail space, there is still going to be a significant increase in consumer spending during the holiday season. In 2016, Wal-Mart‘s (NYSE: WMT) total revenue during the fiscal fourth quarter remained about flat at $130 billion, while the overall retail sector grew 3% year-over-year (y-o-y) during the holiday period. This was largely due to an increase in online shopping, as well as a broader shift from traditional gifts to gifts of travel and entertainment. We expect this industry trend to continue this year as well.
According to Mastercard SpendingPulse, 2017 is expected to see the strongest holiday season sales growth since 2010, primarily driven by e-commerce sales, potentially surpassing 5% y-o-y growth. In fact, the retail sales between Nov. 1 to Dec. 11 grew strongly at 5.4% y-o-y, indicating that the retail industry benefited from Thanksgiving weekend and Cyber Monday sales. In terms of general merchandise store sales in the U.S., the category grew 4% in November 2017 (while this figure declined 1.4% y-o-y in November 2016). Based on these factors, we expect Wal-Mart to benefit from the positive holiday sales momentum this year. We forecast Wal-Mart’s holiday sales in 2017 to grow at nearly 2% y-o-y, translating into nearly $89 billion in sales (store and online).
Wal-Mart still relies heavily on in-store sales, which could be negatively impacted by the ongoing customer shift from store to online shopping. Although Wal-Mart is investing heavily in its e-commerce initiatives, with its recent acquisitions in high-margin categories such as shoes and apparel, it will take some time for the company’s online growth to see a significant impact on its overall results. E-commerce currently accounts for only around 3% of Wal-Mart’s total revenue, but the company has been emphasizing e-commerce growth going forward in order to remain competitive with competitors such as Amazon (NASDAQ: AMZN). It should be noted that Wal-Mart’s e-commerce growth accelerated to 60%+ y-o-y levels in the first two quarters before slowing slightly in Q3. The industry-wide e-commerce sales during the 2017 holiday season are expected to increase 14% y-o-y to $107 billion.
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Our $93 price estimate for Wal-Mart’s stock is slightly below the current market price.
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