Walmart's investor meeting tends to 'move the market' as a consumer bellwether: Analyst

Walmart's (WMT) two-day investor meeting is underway in Tampa, Florida, and one analyst expects it to be a market mover.

"Not only does this [meeting] tend to move Walmart stock, we think it tends to move the market in general, just being a consumer bellwether," D.A. Davidson Senior Research Analyst Michael Baker told Yahoo Finance.

On Wednesday, the public will have access to the second day of meeting, beginning at 8 a.m. ET. Then, investors can expect comments from the company's CEO Doug McMillon to individual business unit CEOs within the company.

As consumer spending shifts away from discretionary spending to focus on food, some analysts say Walmart is in a prime position.

"We think Walmart is taking market share in non-discretionary categories. They're well positioned there. That's where they've historically been strong," Baker said.

With that in mind, Baker is keeping an eye on plans by the world's largest retailer to maintain low costs, in particular with its flywheel strategy, which allows it to keep prices low on key consumables (like food) to drive market share.

Affordability remains a key strategy for the retail giant, especially as consumers look to trade down, which is boosting visits. Last quarter, Walmart beat estimates as mid-and higher-income consumers looked to the retail giant for value.

Evercore Analyst Greg Melich weighed in on the trade-down boost in a recent note, upgrading shares from In-line to outperform.

"The traffic turn appears to be building, and with consumers across the demographic spectrum making wallet allocation choices after several years of record nominal retail spending, Walmart is poised to regain share," Melich said.

Also, on Baker's watchlist for the meeting are updates on Walmart's plan to reignite growth at its subsidiary wholesale retail brand, Sam's Club, which has plans to open 30 locations in the next five years.

Baker is also looking out for announcements on Walmart's other alternative businesses. That includes Walmart Marketplace, which now includes 400 million units including first-party and third-party sellers, its advertising business Walmart Connect (which grew 30% in 2022 to $2.7 billion), in addition to Walmart Fulfillment Services, its data platform Walmart Luminate, its membership platform Walmart+, and its local delivery service, Walmart Go Local.

"Those are all higher margin businesses...not as big of a sales driver, but very high margins," Baker said.

‘Labor costs are still a pressure point,’ analyst says

This meeting takes place after Walmart recently went through layoffs at five of its U.S. e-commerce warehouses, affecting more than 2,000 positions.

"Labor costs are still a pressure point, but perhaps less so this year than they were last year," Baker said.

"Walmart's already brought its wages up, and they're at a point where we don't think there's that much in the way of increases ahead." Earlier this year, Walmart announced plans to hike its average hourly pay to more than $17.50. Those were reflected in the March 2 paychecks.

Baker added, "All in all, we think margins will be more flattish this year rather than down significantly last year."

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Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

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