Will Walmart’s War on Thanksgiving Pay Off or Backfire?
Goodbye Thanksgiving. Hello Black Friday parties.
That is, at least, for Walmart Inc. (NYSE: WMT). The world’s largest retailer has turned working on the Thanksgiving Holiday into a party. A celebration of capitalism if you will.
Starting at 4 p.m. this Thanksgiving, Walmart is launching its inaugural Light Up Black Friday party, which runs until the company’s official Black Friday deals start at 6 p.m. that day.
To dissuade you from protesting that your loved ones must work on Thanksgiving, Walmart is anticipating handing out four million cups of free Keurig coffee and two million Christmas cookies from the store’s bakery.
But Walmart isn’t waiting until Thanksgiving to start its Black Friday barrage. The war for your Christmas cash has already started. In all honesty, Amazon fired the first salvo by announcing free shipping for all customers through the Christmas holidays.
Walmart’s next biggest competitor, Target, has followed Amazon’s lead and suspended online shipping fees for the holidays.
While Walmart hasn’t waived shipping fees, you won’t pay them anyway if you choose to pick up your items in the store. And this isn’t just a holiday deal for the retailer — it’s year-round.
But Walmart has already begun to offer discounted Black Friday deals online. Furthermore, its official start to Black Friday begins earlier than ever this year at 6 p.m., just after the Light Up Black Friday coffee and cookies party.
Furthermore, Walmart will start offering Black Friday deals online at 10 p.m. on Nov. 21 — for those that choose to stay home and order online.
According to the company, roughly 18 Black Friday sales will be offered at Walmart.com that Thursday night. You can expect the same year-over-year discounts on LED TVs, computers, laptops, etc.
The question is, why is Walmart going to such extremes in its broadside against the Thanksgiving holiday in favor of Black Friday? You can once again blame Amazon.
While there have been bright spots in Walmart’s online sales, for the most part, the company has struggled to compete with Amazon on the internet. But Walmart’s online efforts may finally be starting to pay off. The company expects online sales growth of 40 percent this year and 35 percent growth next year.
Still, that growth has come with a cost. Ahead of last month’s investors meeting, Walmart trimmed its 2019 earnings forecast to a range of $4.65 to $4.80 per share, down from $4.90 to $5.05. The new view is more in line with analyst expectations at $4.79 per share.
Rising costs for improving online sales were the culprit. In fact, Walmart blamed the lowered guidance on its $16 billion acquisition of a 77 percent stake in Indian e-commerce giant Flipkart.
The high cost was a win-lose for Walmart. It outbid Amazon for the Indian e-retailer, but profitability clearly took a hit.
We will get a closer look at Walmart’s finances next week when the company releases its third-quarter earnings report. Analysts are expecting earnings to rise a penny per share year-over-year to $1.01. Revenue is seen rising a measly 1.8 percent to $125.44 billion.
EarningsWhispers.com puts the third-quarter whisper number at $1.03 per share. However, even beating that figure, online sales growth could be the make or break for WMT stock’s price action following the event.
From a technical perspective, WMT stock has been a bulwark against the recent turmoil in the broader market. The shares are up sharply since the company’s last trip to the earnings confessional, forming a cup-and-handle pattern that could indicate short-term gains through earnings next week.
That said, there are warning signs that this rally is long in the tooth. Specifically, WMT’s 14-relative strength index (RSI) is trading at overbought levels. What’s more, the market hasn’t been kind following earnings reports so far this season. Investors have rewarded strong quarterly reports with profit taking.
Walmart will need an especially stellar quarterly report for WMT stock to move higher from here without a profit-taking plunge. No amount of Black Friday front-running will stop that selloff, but it may offer a better buying point for WMT stock for long-term bullish investors.
Keep scrolling down to read more investment tips from Money & Markets contributor Thomas Lancaster.