Walmart Beat & Raise Not Enough for Wall Street & WMT Options Trade

invest smarter with Schwab. We're back on morning trade live. Walmart is under pressure this morning despite beating top and bottom line expectations for the second quarter and raising its full year guidance. The retail giant missed street expectations for comp sales, with e-commerce sales driving a significant portion of its growth. Walmart cited tariff refunds in its report as a boost to current earnings and its full year forecast. So let's just check in on the retail sector amid a busy week of earnings here. Walmart shares under significant pressure right now down 9%. Target is just on the line. Obviously had a nice day yesterday following its report with obviously the double beat there. Costco is up two down excuse me two along with Home Depot by a similar percentage amount right now. But let's go inside out on Walmart. Joining us now is Sucharita Kodali who's the VP and principal analyst at Forrester Research. Rita, thank you so much for your time today. Let's just talk about what happened here, because there was some things to like some things not to like a very mixed report. But, you know, I mean, if this is an economic barometer, what did it tell you? Well, the numbers actually were really good. The overall revenue growth was 6% for a company of Walmart's size. That's not trivial. Now, I think that there were some questions around why the comp store sales numbers were a little bit soft. That has to do with a few things. One is that there are some of these alternative revenue streams, like marketplaces and ads, which have been doing very, very well and have been contributing to the overall top line. But you also had some issues, I think, with the pharmacy business. But those sound like they're temporary. And for, as I said, you know, for a company this size to continue on a mid-single-digit trajectory, it's pretty remarkable. The numbers were strong, were as strong, if not stronger than targets yesterday. I think that the stock has just been very richly valued. So we're seeing a little bit of I think, some people taking some gains. Okay. I mean but Walmart hasn't performed particularly well. I mean this year. And there seems to be something missing here. But maybe, as you say, it's been put down to the valuation. What about some of the pressure in the pharmacy business. So that e-commerce held up. But obviously something to do with federal pricing seems to be weighing there. I know that they did highlight that. Is that any concern? I think that the overall stats are quite strong. I think profitability is strong. Top line is strong. They are growing very, very strong in digital. They're growing with alternative revenue streams. They have a very strong loyalty program now with Walmart. Plus the company is on a strong trajectory. It really is an arms race. I would say in the retail industry between Walmart and Amazon. Now together, both of these companies are generating $1 trillion in what we call gross merchandise value, which is the amount that shoppers purchase from those two retailers. So that's pretty strong. My, my hunch is, is that this is a temporary dip that comes when people just want to take some some gains off of the table. I would expect a rebound in probably a few weeks. All right. I've seen obviously the C-suites been out talking about how business does remain strong to your point. But you know, the refunds are helping to keep prices low. How sustainable do you think this is before this becomes a, you know, margin pressure story for a name like Walmart? I think that we certainly are in an still an inflationary environment. And consumers, particularly at the lower income demographics, are feeling extremely pressured. There is low consumer confidence overall. But in that environment typically companies that are value retailers Walmart, Costco, target, they tend to gain share and they'll likely gain share at the expense of some of the grocers, the traditional grocers, the regional grocers that haven't either had as much revenue to invest into innovation, or they simply are not able to execute well in their physical stores. So I think that regardless of the inflationary environment, Walmart will fare well. But, you know, to your point, certainly there this is more of an indicator of the overall economy than anything. And I think that it's about consumers on a flight to value. Yeah. I mean, you read the headline of the slowest sales growth in six years. You start to ask some questions. I mean, as far as, as I mentioned, a barometer for the overall health of the consumer and the economy right now, given everything we've heard this week, Sucharita, about what target had to say about what some of the, you know, companies in the business of DIY have had to say, Lowe's, Home Depot, with some others still set to report, like BJ's Costco. How are you tying it all together? What are you expecting to hear from them? Well, again, the value retailers tend to do very well in environments of uncertainty. DIY retailers are certainly a little bit more challenged. We saw Lowe's numbers. I don't expect Home Depot's numbers to be substantially stronger. And a large part of the reason for that is because you just have higher inflation rates, which affects the housing industry. And that, of course, has an effect on on whether or not people are even renovating or investing in their homes. So, so there are sectors that, of course, are doing well, sectors that are not doing well, value mass merchants, clubs, channels, club stores, those tend to do well in environments like this. There's a lot of uncertainty in in the macro economy right now. There's there's no question about that. You have a number of retailers that are not doing as well. And you have a lot of the value retailers that are picking up share, both from the high end where people are trading down and from the low end, where people are just trying to make their dollar stretch further. So, so Walmart and at a micro company level is doing very well. What it says about the economy is that the next 12 months are going to be very uncertain. And we've been talking about a recession for a long time, but the economy has resisted it. We'll see what happens in in the next 12 months. Yeah. And I guess it's all about how you mitigate and are addressing some of those uncertainties and challenges and bifurcation within even the consumer. Really appreciate your time today. Thank you so much. Sucharita Kodali there. Let's trade this name that is Wal Mart with Kevin Henkes, host of Fast Market. Good morning Kevin. Walk us through an example. Trade on this name. If you think that Wal Mart's numbers were good. And you think this is a valuation coming down to more reasonable levels. One way to look at Wal mart to trade is something in the cash secured put. So what I did I went out to September 4th just about two weeks Sam. And I'm selling the 100 put. That would give you a chance to buy the stock at not $100 but $100 minus whatever credit you take in the. The put was trading about $0.80. That means you would buy it at $99.20. If you look at the chart, it's a much more favorable level. I think this is a valuation reduction. The historical valuation on Wal Mart is something in the 22 to 20 8PE range. It was over 40. So as it comes down still a good company doing great things making enormous amounts of revenue. So buying the stock putting this in at selling the 100 put. If it doesn't get there you keep your credit. If it gets there, you buy the stock at a lower level, an even lower than that strike price. So selling the cash secured put for around $0.80. The 100 strike is what I'm looking at here in Walmart Sam. All right. Well that's certainly what I was thinking as far as the valuation. When we look at the reaction today down 9%. Thanks so much Kevin Henkes joining us from the Cboe this morning. Looking at an example trade on Walmart. We're seeing