Finimize - 🏅 Walmart won big

What’s going on here?

US retail juggernaut Walmart blew past expectations on Thursday, with sales taking off last quarter.

What does this mean?

Big retailers Target and Home Depot reported some uneven results this week, and that meant all eyes were on fellow retailer Walmart’s update on Thursday morning. Expectations were already riding pretty high – after all, the Bentonville titan’s got a knack for scooping up customers from pricier stores into its budget-friendly food aisles. And the supersize firm didn’t disappoint: Walmart went right ahead and overshot folks’ hopeful predictions, with first-quarter sales growth of 7.4% in stores open a year or more. That’s pretty impressive, especially considering Target’s flat sales and Home Depot’s sales dropoff. Plus, Walmart’s e-commerce sales were up 27% – which could have the old “Walmart’s the new Amazon” chorus back in full force again.

Why should I care?

Zooming in: Shrinking stock.

Whether a sign of the times or something more sinister, "shrink" – that’s retail speak for stealing – has become a gnawing issue for some retailers. Just ask Target. The firm’s bracing for retail crime to snip a hefty $500 million from its profit this year, throwing a wrench in its efforts to get margins back to pre-pandemic levels. Target executives reckon it’s an industry-wide problem, but it doesn’t seem to be rattling other retailers quite as much: after all, it got very little air time on Walmart’s post-earnings conference call.

The bigger picture: The bare necessities.

Walmart’s stock is closing in on an all-time high right now, thanks to the everyday bargains that have been flying off its shelves. See, while selling pricier merchandise has been a sweat-inducing endeavor lately, the basics have been raking in the cash. That’s given a lovely little boost to firms that aren’t in retail too, like Procter & Gamble and McDonald’s. But the tide may yet change: if consumers regain confidence and start to splurge, some popular defensive stocks just might take a beating.

What’s going on here?

Alibaba’s underwhelming results, out on Thursday, suggested the firm’s hit a dead end – but its listing plans could help it reverse.

What does this mean?

China’s economy might be dusting itself off, but spending on physical goods (real, tangible things) seems to be on an extended sabbatical – and that’s stoking fears that the country’s long-awaited consumer spending boom could still be miles off. That cold spell might explain why Alibaba – which earns most of its money from Chinese commerce – saw single-digit revenue growth again last quarter, falling just shy of analysts’ estimates. But it’s not all woe: Alibaba thinks online commerce is starting to shake off the cobwebs now, with a healthy appetite for fashion and healthcare products helping domestic momentum speed up in March.

Why should I care?

Zooming in: A bumper breakup.

Investors have been perched on the edge of their seats ever since Alibaba announced it’s splitting into six distinct business units. And that’s no wonder: this shift could make the individual segments more nimble – potentially turbo-charging growth, and maybe even triggering a share rebound. That prospect meant analysts were pretty gung-ho when the firm announced a spin-off plan for its $12 billion cloud business, the nation’s biggest: after all, there’s every chance the venture could be a success, especially if the booming demand for Tongyi Qianwen, Alibaba’s answer to ChatGPT, is anything to go by.

For markets: The Big Long.

Chinese stocks are in a bit of a freeze right now, with investors getting cold feet as the country’s rebound slows: in fact, average foreign trading volumes are currently less than a tenth of January’s record highs. But some true contrarians are backing the country. Filings out this week showed that Michael Burry – the man who accurately predicted the global financial crisis – has seriously upped his bets on Alibaba and JD.com.