Walmart Inc.’s move to open new Sam’s Club locations and its latest round of wage increases for U.S. associates are positive moves by the retailer, says Jefferies analyst Corey Tarlowe.
Early Thursday the retail behemoth said it plans to open over 30 new Sam’s Clubs across the U.S. over the next several years, with the first opening in Florida in 2024. Sam’s Club will launch five new supply chain fulfillment and distribution centers in 2023, with the first location planned in Georgia in the third quarter, Walmart
WMT,
said. Sam’s Club is part of the retailer’s membership-based warehouse division.
This is the first unit expansion plan since Walmart rationalized the Sam’s Club base in 2018, according to Jefferies analyst Corey Tarlowe. “We view this investment as an attractive growth opportunity ahead,” he wrote, in a note released Thursday, pointing to Sam’s Club’s strength. “Sam’s Club has posted 11 consecutive quarters of double-digit comp growth with strong contributions from both transactions and ticket,” he added.
See Now: Walmart to open new Sam’s Club in Florida in 2024, more than 30 new clubs in next several years
Jefferies has a buy rating for Walmart.
Earlier this week Walmart also announced minimum wage increases for hourly employees, ranging from $14 an hour for Supercenter employees to $16 an hour for those working in fulfillment centers. Walmart also raised its minimum wage for hourly Sam’s Club employees to $15 an hour.
The wage investments are a margin headwind, but also a key talent tool to support long-term growth, according to Tarlowe. “Net-net, we view the wage increases as a potential near-term drag on margins, but a necessary investment to attract and retain associates,” he wrote, in a note earlier this week. “We expect the incremental wage investments will be included in guidance provided by the company in its upcoming earnings release.”
See Now: Walmart raises minimum wages, starting with March paychecks
The company reports its fourth-quarter results on Feb. 21.
Walmart’s stock rose 0.03% Thursday, compared with the S&P 500 index’s
SPX,
gain of 0.6%. The retailer’s stock has risen 4.8% over the past 12 months, outpacing the S&P 500’s decline of 6.7%.
Of 40 analysts surveyed by FactSet, 30 have an overweight or buy rating and 10 have a hold rating for Walmart.
Additional reporting by Tomi Kilgore.
Credit: marketwatch.com