Cowen Upgrades Wal-Mart (WMT) to Outperform
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Cowen upgraded Wal-Mart (NYSE: WMT) from Market Perform to Outperform with a price target of $83.00 (from $76.00), saying a combo of price investments, creative integration of physical + digital and the Jet acquisition positions the company to regain retail dominance.
Analyst Oliver Chen commented, "We're confident WMT's positive US traffic (7 straight quarters) should continue over the next 2 years as WMT makes more aggressive price investments and makes further improvements in the customer experience. WMT's impressive 2Q results of US comps of +1.6% driven by traffic of +1.2% demonstrated that the retailer is taking share at the expense of TGT, dollar stores, and grocers. The investments in wages/training from the last 2 years have elevated the store experience, as highlighted by customer satisfaction scores for the total shopping experience (76% of respondents) and customer service (63% of respondents) at 2-year high's in our proprietary consumer survey (see pages 4-5 inside report). In addition, the price roll-backs in food/grocery are clearly resonating with customers and the 2-year plan to invest in price just began in 1Q of this year. Overall, WMT is only 1/3 finished with its efforts to improve the store experience as the remaining efforts will be focused on pricing, merchandising stores, and driving better performance from store managers. We anticipate a more thorough discussion at the Oct. analyst day. Bottom-line, we see WMT continuing to gain share at the expense of TGT and retail peers."
On Jet, the analyst said stronger E-commerce growth has been the missing puzzle piece for WMT, but they believe the Jet acquisition is a step in the right direction.
Shares of Wal-Mart closed at $70.30 yesterday.
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