After a troublesome time for students over the past year, school-goers are looking forward to starting in-person teaching again. With lockdowns lifting and vaccines administered, it’s looking like students will be returning to normal school again, and what better way to celebrate than by buying shiny new pencils, notebooks, and backpacks?
Retail companies are looking forward to a nice boost in sales as we head into September, but is Walmart (NYSE: WMT) a good investment for those looking to get a slice of the back-to-school action?
First of all, what is a back-to-school stock?
Simply put, a back-to-school stock is a company that benefits from students returning to education. The time period differs around the globe, but generally, it takes place between late August to mid-September.
Retail and educational technology stocks usually find their sales get a nice boost during this period as students load up on fresh stationery, reading materials, and start online courses.
Is Walmart the best back-to-school stock?
Walmart smashed its earnings expectation this week for Q2. The retail giant posted impressive results thanks to high grocery sales coupled with a strong start to the back-to-school season, making it look like a good bet for the back-to-school season.
For the second quarter, Walmart posted:
- Adjusted EPS of $1.78, compared to the $1.57 expected.
- Revenue of $141.05 billion, versus $137.17 billion estimated by analysts.
Impressively, Walmart reported its highest quarterly revenue ever in a quarter outside of the Christmas season.
The company’s same-store sales in the U.S. jumped 5.2% in Q2, which was lower than the 9.3% it saw in the same period in the year-ago quarter. This shows that Walmart still has some progress to make if it wants to get back to the levels it witnessed in previous years.
E-commerce sales are slowing slightly, growing 6% in Q2 versus 97% in the year-ago period. However, Walmart stated that if we look back over the past two years, its e-commerce sales have still doubled.
The company, famous for discounts, also increased its forecast for the full year, explaining that Walmart now expects earnings per share (EPS) to come in between the $6.20 to $6.35 range with same-store sales in the U.S. jumping by up to 6%, excluding fuel.
CFO, Brett Biggs, told CNBC that shoppers have been busy stocking up on backpacks and other items for school. Biggs explained that items associated with students returning to in-person teaching, such as school bags, has not been dampened by the prospect of rising Delta variant cases which might result in them staying at home with their books. He stated that, so far, he hasn’t seen a change in consumers’ shopping behaviors.
Is Walmart a good investment?
Walmart said it has been able to avoid some of the other challenges that retailers have faced, such as supply chain challenges and rising inflation rates due to the sheer size and powerfulness of the company. They have done this by using their own vessels to import goods and have planned ahead by securing supplies earlier than other smaller sellers meaning they are prepared if supplies become an issue in the remaining months of the year.
Despite its dominance in the industry and impressive earnings beat, Walmart shares are still falling behind retail rivals Target and Kroger. Nevertheless, the company is still a great stock to consider for investors to get in on the return to school trend.
Walmart stock is still up 12% over the past 12 months so is still providing consistent, steady gains to its shareholders. A big push for the back-to-school season could see Walmart outpace its competitors.
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Financial Writer at MyWallSt
Nicole's favorite stock is Etsy because she loves its original and handmade items. She believes people are going to stop buying mass-produced items and start purchasing ‘one of a kind’ fashions and furnishings. In a world of sameness, Etsy has the advantage.