Wal-Mart (WMT, Financial) has been hovering near its 52-week high levels for quite some time, but the potential tailwinds can push the stock higher in the near future. Recently, Wal-Mart finalized a $3.3 billion purchase of e-commerce start-up Jet.com in order to fortify itself against Amazon (AMZN, Financial) in the challenging segment. As a matter of fact, Amazon is growing at a faster rate, but Wal-Mart will now gain a lead due to the purchase of Jet.com.
Wal-Mart had formerly grasped a strong position in the United States, but the company is looking to expand its services in one rapidly developing country, India. As per Bloomberg, the company is strategizing to invest approximately $1 billion into India’s largest online retailer, Flipkart.com.
If Wal-Mart successfully completed the deal with Flipkart, it would be a great achievement for the company, as India has a lot of opportunities to offer. Moreover, with this deal, the company will be able to compete against Amazon in India. Most significantly, with over billion customers and a rapidly growing economy, India may soon become a massive growth engine like China.
Moving onward, the company has decided to slow down the opening of new stores. In the upcoming fiscal year 2018, the company has strategized to add only 55 new stores in the United States, making it the most sluggish store growth in over 20 years.
However, Wal-Mart will carry on opening new stores internationally at the same rate, with around 200 new stores to be opened next year. It may look like a bad idea of slowing down the store growth rate, but the company made a smart decision.
The company detailed that instead of opening new stores, it will use the cash to enhance performance at its prevailing stores and hasten its e-commerce abilities. During the last two years, the company has performed very well as customer satisfaction scores have surged and comps have escalated for successive eight quarters.
Not only this, the company is also strategizing to introduce self-driving shopping carts, as it has patented a technology that will permit users to control shopping carts with their smartphones and use them hands-free. Moreover, the company is taking various other innovative steps that will help it to move ahead of its competitors.
Conclusion
Although Wal-Mart may have struggled due to stiff competition from Amazon, the company is likely to benefit from its recent initiatives. Growing online presence and expanding into rapidly growing economies will help Wal-Mart breach past its 52-week highs.
Disclosure: No position in any of the stocks.
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