Why Walmart Is the Microsoft of 2019

Walmart (NYSE: WMT) delivered its fiscal first-quarter report last week, and once again, the company looked strong. Same-store sales grew solidly, it beat on earnings, and if revenue came in a little below target, some of that could be traced to currency fluctuations in foreign markets. But it was e-commerce, with its 37% growth, that put the spring in the retailer's step.

In this segment from Motley Fool Money, host Chris Hill and senior analysts Andy Cross, Ron Gross, and Jason Moser discuss the long, steady evolution of Walmart into a digital powerhouse, and what it means for investors -- and the retail space broadly.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.

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This video was recorded on May 17, 2019.

Chris Hill: Walmart shares up this week after a rock-solid first-quarter report, Ron. Same-store sales were looking good. E-commerce sales looking really good!

Ron Gross: Is gianter a word?

Hill: It is now!

Gross: [laughs] Another strong quarter, Chris. Earnings beat expectations. Sales were light due to weakness overseas, but the U.S. was up 3.3%. International down 4.9%, but if you exclude currency, up 1.2%, not too shabby. Comp sales up 3.4%. But e-commerce is the big number here, up 37%. There are costs associated with that, but still a very strong quarter.

Hill: You look at the investments they have been making in e-commerce, Andy, and they've been piling up these types of quarters for a while now. I can't think of a single quarter where they just knocked it out of the park with e-commerce being up 80% or something like that. But you start stacking up these 20%, 30% gains, and it pays off.

Andy Cross: Guys, I think Walmart is the Microsoft equivalent in 2015. And Doug McMillon may be the Satya Nadella of 2019.

Gross: Wow, bold!

Cross: I mean, you look at the investments they're making e-commerce-wise. Flipkart, they have a new walmart.com experience. They now have pick-up at 2,400 stores. They have a Walmart voice order through Google Assistant you can now use. They're working on next-day delivery. They are making these investments in e-commerce. Doug McMillon, the CEO, is trying to grow Walmart into a company that can compete against not just Amazon, but compete in a digital space more than ever so before.

Jason Moser: Yeah, we were saying this week on MarketFoolery, Walmart has to make these investments, right. I mean, this is something they have to do. But I thought the timing was impeccable for Jeff Bezos on May 14th to tweet out, "Hey, we're investing $1.5 billion in our new air hub to get you your packages faster. Three million square feet and it's going to create 2,000 jobs. And if you're guessing that driving a front loader was fun, you're right." I mean, it was just very well-timed. And I think it all goes back to this point that, yes, it's great to see Walmart doing this, they really kind of have to. But I think this also really works out well for consumers. As they get bigger, specifically Amazon, you're seeing some complaints about turnaround time and shipping schedules and people not getting their packages in the day or two days that they were promised. Now, with Walmart upping their game, there's going to be a little bit more choice there.

Hill: Yeah, it really seems like Walmart is closing the gap with Amazon. And in doing so, Ron, is maybe separating themselves from Target.

Gross: Well, for sure! You can buy Target now for 12 times earnings, by the way. You have to pay up like 21 times for Walmart. You can see it just in the valuation. But, starting to roll out next-day delivery across the country for more than 200,000 items. That's a big differentiator, as you mentioned, compared to Target. Comp sales, I just want to bring it back to that traditional metric, up 3.4%. Best in nine years for Walmart. These numbers are really strong. If we ignore international just a little bit because of the currency fluctuations, it's a really strong report.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Andy Cross has no position in any of the stocks mentioned. Chris Hill owns shares of AMZN. Jason Moser owns shares of AMZN. Ron Gross owns shares of AMZN and Microsoft. The Motley Fool owns shares of and recommends AMZN and MSFT. The Motley Fool has a disclosure policy.