The continuing chaos at the nation's ports that is already causing out-of-stocks and shipping delays at retailers before the peak holiday season may not crush the world's largest retailer Walmart WMT analysts assert.
In large part, that reflects the benefits of Walmart being, well, humungous and very well run by its executive team.
Jefferies retail analyst Stephanie Wissink points out that Walmart owns a third-party truck fleet, meaning it could allow for cost increases and delays by private logistics producers. Wissink — who rates Walmart's stock a Buy — adds the retailer has leading scale that allows it to get the best inventory from suppliers at the best possible price.
Meanwhile, an analyst at the Bank of America BAC says Walmart was in front of the shipping crisis. The company's inventory is up more than $3billion compared with 2019. -Benefit of Ohmes research shows the previous order being made to empty shelves.
For Walmart, that is likely to equate to better in stock positions and fewer missed sales opportunities at the holiday season.
Similar to Wissink, Ohmes thinks Walmart's scale gives it advantages at the ports not afforded to smaller retailers. He believes the TGT shares these size benefits as well.
Target and Walmart should benefit from more favorable port access, long-term container shipping agreements and chartered vessel capacity that continues to limit reliance on spot markets and ensures that both companies have the capacity they need for Holiday. Both companies are ideally equipped to mitigate trucking freight cost pressures given long-term contracts and in Walmart's case an in-house trucking fleet that is not faced significant labor shortages or cost pressures, says Ohmes.
That said, investors appear to be taking a wait-and-see approach to Walmart aroundventing port challenges and inflationary pressures.
The stock of Walmart is down 3% year-to-date, falling behind the S&P 500's gain of 18% GSPC In the last month alone, Walmart's stock has dropped 2.7%.
Mais the Walmart bulls on the street remain out in force.
Food cost inflation has meaningfully increased, which only adds to the pressure created by issues like freight and labor; we like Walmart's relative position in this backdrop it has scale with vendors, its price gaps to grocers have only increased during COVID, there is evidence of price increase. The market has been concerned about Walmart's desire to pass through rising costs, but it does appear that the company is focused on balancing the interests of shareholders and customers, says Wells Fargo WFC analyst Ed Kelly.
Brian Sozzi is an anchor of Yahoo Finance (as a contributor to The New York Times) and editor-in chief. Follow Sozzi in Twitter, and LinkedIn.