The big box retailer, Walmart, has taken a big hit. Find out why.
Walmart stock has taken a sizeable hit recently after reporting their holiday results.
Their CFO has blamed uncertainty in the economy and consumer behavior. As prices rise, people start to put more things on credit to get by. It makes sense considering people need to eat in order to survive so if you have no other choice... why not? This, however, comes at a price. A majority of credit cards are unsecured meaning there is no collateral backing them. Why does this matter? Well, if you take someone who can't afford groceries to begin with and you give them a credit card, the likely hood they will default on a credit card payment is pretty high. When they don't pay the with credit card, it begins to create a snowball effect and to keep it short, it does not help Walmart gain revenue.
Walmart wasn't the only company that had struggled. Many retail stores experienced a decline in sales and there are numerous reasons as to why, but the main point is it was not just Walmart.
PE Ratio: 41.54
ROE: 22.33%
As always, do your own research. Walmart is a big company, so the bigger PE Ratio means analyst expect the company to bring in a lot of revenue. Looking at the high PE ratio mixed with their not-so-great performance in their revenue, I lack confidence to buy this stock. I do think Walmart will have to focus on a more online approach as it is just what a lot of people prefer now and will prefer as time goes on but only time will tell. I highly doubt Walmart will go anywhere anytime soon but for the short-term investors I would tell them I personally will not be investing.
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Walmart is an interesting one, if prices are rising, the company selling it for the cheapest will become an even bigger winner. Or will consumers go to better stores if they have more money?
That’s an interesting point. I do feel like as peoples incomes increases so does spending however for this I feel like whoever is offering the better deal.