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Wal-Mart Sharpens Online Edge, Join Forces With Rakuten

Zacks Equity Research
Updated

Wal-Mart Stores, Inc. WMT, which is leaving no stone unturned to compete with online retail giant Amazon.com, Inc. AMZN, has announced strategic partnership with Rakuten Inc., a leading Japanese e-commerce firm. Per the deal, both the companies will collaborate to sell online groceries in Japan as well as eBooks and audiobooks in the United States.

Following, the news the company’s shares gained nearly 2% on Jan 26, 2018. In fact, the stock has surged 63.2% in a year, outperforming the industry's growth of 52.2%.

Deal Boosts International Presence

With the objective of capitalizing on the booming online shopping, Rakuten and Seiyu GK, a subsidiary of Walmart have reached a new agreement to launch “Rakuten Seiyu Netsuper”, a new online grocery delivery service in Japan. The service is likely to be launched in the latter half of 2018. Through the partnership both the companies will not only look to increase fulfillment capacity but will also provide “quality” and “low prices” services.

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The company’s deal with Rakuten gives an indication that the company has chalked out a new formula to increase international presence. Wal-Mart, which remains committed toward achieving growth across all its markets; on the back of fresh products, expansion of online grocery and private brands is likely to gain from the deal..

With operations spread in China, Mexico, Canada and UK, international forms Wal-Mart’s second-largest segment, in terms of revenues. Evidently, international sales constituted about 24% of the company’s total sales in fiscal 2017, following the U.S. segment which accounted for 64%. It has done well in Mexico and China but has struggled in Brazil due to economic concerns and in UK due to competition from discount retailers.

Wal-Mart Enters e-book Market

Wal-Mart is now the retail partner of Rakuten Kobo, which sells e-books, audiobooks, e-readers as well as tablet computers. Following, the deal Wal-Mart customers in United States can buy approximately six million titles. The company will also sell digital book cards in stores.

Michael Tamblyn, Rakuten Kobo CEO said “Walmart is one of the top retailers in the world and one of the largest booksellers in the U.S. Our strategy from day one has been to partner with the world’s best retailers, so that they can easily offer their customers the option of reading digitally. This informs the software and devices we create, the books and authors we promote, and also the partnerships we build.”

The Zacks Rank #3 (Hold) company’s effort to foray into e-book market gives an indication that it is trying all means to counter the growing dominance of Amazon.

Looking for More Promising Bets? Check These Trending Retail Stocks

Dollar Tree, Inc. DLTR, carrying a Zacks Rank #1 (Strong Buy), has a splendid earnings surprise history and an impressive long-term earnings growth rate of 13.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ross Stores, Inc. ROST has an average positive earnings surprise of 5.5% in the trailing four quarters and a long-term earnings growth rate of 10%. The company holds Zacks Rank #2 (Buy).

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Wal-Mart Stores, Inc. (WMT) : Free Stock Analysis Report
 
Dollar Tree, Inc. (DLTR) : Free Stock Analysis Report
 
Ross Stores, Inc. (ROST) : Free Stock Analysis Report
 
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Zacks Investment Research