(Video) Deutsche Bank chose ‘Walmart’ as the top choice for retailers… why?

[이데일리 유재희 기자] Deutsche Bank, a global investment finance company, chose Wal-Mart (WMT) as the top pick for retail stocks. This is because it will be a clear winner in the retail market.

According to CNBC, an American economic media outlet, on the 12th (local time), Christina Katai, an analyst at Deutsche Bank, evaluated Wal-Mart while maintaining a ‘buy’ rating and a target price of $168.

This week, attention was focused on the fact that it was an evaluation that came out while the earnings of retail companies such as Walmart, Target, Home Depot, and TJX Company were due to be announced one after the other.

Wal-Mart is the largest supermarket chain in the United States, ‘Always Low Price’, ‘Save Money. As can be seen from slogans such as ‘Living Better’, the lowest price strategy is promoted as a core value. It is also known as a company with a high portion of food.

Walmart will announce its first quarter (February-April) earnings for fiscal year 2024 on the 18th. The Wall Street consensus (average forecast) is set at $148.62 billion, up 5% from the previous year in terms of sales. Earnings per share (EPS) are expected to have recorded $1.3, similar to the same level as the same period last year.

“Wal-Mart has proven its competitiveness through sales and EBITDA (earnings before interest, amortization, and amortization) growth over the years,” said Christina Katai. Accordingly, he raised his estimate of same-store sales growth for Walmart from 5.5% to 6% and for Sam’s Club from 6.8% to 8.5%. “The inventory issues of major retailers appear to have been largely resolved,” he explained. “More and more customers are preparing for industry promotions.” He also said, “Walmart’s food division accounts for a large portion of its total sales, and since food inflation is slowing, it is analyzed that it will benefit from it.

Christina Katai expects Walmart to revise its full-year earnings guidance this time around. At the start of the year, Walmart’s annual EPS guidance was $5.9-6.05, below the market consensus of $6.05-6.15. He said, “Following this earnings announcement, we expect to raise our guidance to the level of the market’s expected range.”

He believes Wal-Mart will be the best alternative, especially in a situation where consumer spending is slowing due to the economic recession. Data previously released by Bank of America showed that credit card usage in April fell 1.2% year-over-year, the first negative growth since February 2021. Specifically, as the unemployment rate increased among the high income, their spending on consumption decreased the most.

“Walmart is well positioned to be driven by value-seeking consumers and convenience shoppers,” said Christina Katay. In fact, data was recently released showing that the length of stay of Walmart visitors is increasing the most.

In addition to Christina Katai, Wall Street has been receiving favorable reviews for Wal-Mart recently. Citigroup analyst Paul Reyes said, “Walmart is presenting earnings guidance too conservatively.” “Wal-Mart is positive because it has online and offline centers, convenience, and value consumption, which is the core of American consumption.”

Evercore ISI analyst Greg Melich said, “Walmart is a company with a high rate of earnings announcements that exceed market expectations, so it’s a company to strategically pre-buy ahead of earnings announcements and shareholder meetings.”

Meanwhile, a total of 40 Wall Street analysts gave an investment opinion on Wal-Mart, of which 31 (77.5%) maintained a buy opinion. The average target price is $164.4, which is 8.9% above the closing price ($153.1). Walmart shares are up 8% this year.