This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

JPMorgan Sees Shift in WalMart Strategy as Sales Stagnate

Stock quotes in this article: WMT

NEW YORK (TheStreet) - JPMorgan says recently-appointed CEO Doug McMillon is working to shift WalMart's (WMT) growth strategy to offset fears that the company's revenue growth and comparable store sales have plateaued.

McMillon may be pulling back on WalMart's efforts to enter the grocery business, a business pushed by recently-retired CEO Mike Duke that has had mixed success, said a team of JPMorgan analysts led by Christopher Horvers in an investor report published July 7. Rather than attempting to sell low-price consumer goods, McMillon plans to emphasize WalMart's merchandising offerings, its e-commerce capabilities and its smaller-sized food markets, said the analysts.

McMillon's plan, while leveraging some investments made by Duke, appears to be a shift in strategy for the largest U.S. retailer. WalMart was adding 0.3% to $75.95, trimming its 2014 decline to 3.5%. The S&P 500  has gained 6.9% this year.

Last week, JPMorgan hosted a meeting between WalMart's top brass and Wall Street analysts in a rare private meeting for the retailing giant. On Monday, JPMorgan said it came away from the meeting with the view that McMillon is attempting to alter WalMart's growth strategy.

WalMart CEO McMillon Sees Broad Mandate at Private Investor Meeting

"Overall we walked away seeing a shift in the core Wal-Mart strategy to disciplined pricing and improved merchandising as a means to drive same store sales with Neighborhood Market expansion and enhanced omni-channel capabilities as a means to gain share with new and existing customers," the JPMorgan analysts, wrote on Monday.

"While the small box and ecommerce focus emerged under former CEO Mike Duke, the key differentiation vs. the prior regime is a forthright recognition that price investment in grocery can only go so far to drive traffic/share and in-store conversion across categories can be enhanced by the art of merchandising (with newness a key focus) and higher on-shelf availability (vs. simply relying on halo sales from customers in the store buying groceries)," said the report led by Horvers.

JPMorgan rates WalMart a 'neutral' with an $80 a share price target, indicating that McMillon's shift in strategy will be hard to pull off.

Analysts at the firm believe that even with McMillon's moves, WalMart faces the prospect of peaking or plateauing same store sales. JPMorgan also said on Monday that WalMart may disappoint consensus expectations when the company provides updated 2014 guidance in its second-quarter earnings results.

Wall Street Sees Change at Wal-Mart

As TheStreet first reported, other Wall Street analysts also took Wal-Mart's meeting as an indication that changes to the company's business strategy is likely under McMillon.

Credit Suisse analysts said on Thursday they believed McMillon indicated he's been given a broad mandate by WalMart's board of directors to shake up the company's executive ranks and M&A strategy.

Like JPMorgan, Credit Suisse also said that McMillon will likely invest on improvements to WalMart's merchandising, e-commerce and in-store sales offerings. The goal for McMillon appears to move from away from WalMart's reliance on volume as a driver of same store sales. Instead, WalMart may look to use expanded merchandising efforts, in addition to e-commerce platforms as a means to improve the company's pricing and profit margins.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,804.71 -238.19 -1.40%
S&P 500 1,946.16 -26.13 -1.32%
NASDAQ 4,422.0850 -71.3050 -1.59%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs