The economic data in the past week shows a slowdown in consumer spending. As a major part of the economy, that’s a big deal. Yet retailers are reporting better-than-expected numbers. That suggests there may have been too much pessimism in the short term.
It also suggests retailers with a cost advantage can likely fare well in today’s environment. That bodes well for most big box players. But one is king of them all.
That winner is
Walmart (WMT). Their earnings not only beat expectations, but they raised their outlook for the year ahead – in contrast to other major retailers.
Although shares are already up 25 percent over the past year, the company’s low cost structure leaves it in a strong position to grab customer share amid a slowing economy or if inflation stays higher than expected for longer. That makes the stock worth buying on a pullback, even if shares are a bit on the pricier end at 24 times forward earnings.
Action to take: Investors may want to buy a small stake now, and use any pullback in the stock to add to the position. Share currently yield about 1.5 percent, and Walmart has a long history of increasing its dividend over time.
For traders, the September $155 calls, last going for about $5.35, can leverage a further move higher in the stock in the coming months for mid-double-digit gains.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.
