The Ace up Walmart's Sleeve in the Era of High Prices
This hits the "opportunity" checklist ...
When I discuss an investment opportunity with Bill Patalon, Chief Stock Picker of Stock Picker’s Corner (SPC), we spend just as much time looking at reasons not to invest as we do the reasons to invest.
That’s the essence of what Bill and I talk about as making an “investment case.”
One way to formalize this approach is with a written exercise called a “SWOT Analysis.”
SWOT stands for:
When we recently discussed Walmart Inc. WMT 0.00%↑, after going over some of its “Weaknesses” and “Threats,” I made the case for its “Opportunity” to retain and attract more high-income shoppers.
CFO John Rainey said in the company’s last earnings call that “one of the biggest contributors in the quarter was … from households that make more than $100,000 a year."
Rainey continued: “For general merchandise as an example, two-thirds of the share gain that we had in the quarter was through this income demographic and digital channels.”
Some may say cooling inflation would be a threat to this newly-won-over clientele, but remember that the Federal Reserve’s goal is to slow how fast prices are rising – not to stop them from rising.
It’s a virtual lock that prices will never get back to where they were four, six or eight years ago. And that’s why Walmart can be a winner – even shoppers who make a lot of money don’t want to overpay for items.
In a push to retain and win over even more of those shoppers, Walmart launched a new, private-label food product line: bettergoods.
Walmart says this is its “largest private food launch in 20 years.”
It’s attempting a balancing act between the lower prices it has been known for while still providing the food-aisle variety that it hasn’t been known for.
The bettergoods lineup includes:
Creamy Corn Jalapeno Chowder (under $4).
Oatmilk Non-Dairy Frozen Desserts ($3.44 a pint).
And a “Made Without” line featuring limited ingredients, like antibiotic-free chicken nuggets or its taco seasoning (under $2).
Getting more folks in the store for cheaper groceries with more offerings elevates that potential “cart value,” as in-person shopping leads to buying more than just food.
In Walmart, you can do everything from getting your tires changed to having your glasses repaired at its Vision Center; I picked up a socket set there this week to remove and clean a spark plug in my weed whacker and stopped by the in-store Dunkin for a cold brew on my way out.
Aside from the higher-income shoppers, there’s also something to fill out under the “Opportunity” section in the SWOT Analysis.
Walmart has a sleepy revenue segment through ads, as it only generated $3.8 billion in revenue last year. In comparison, Amazon.com Inc AMZN 0.00%↑ hauled in $50 billion in ad revenue.
But a strategic acquisition by Walmart could soon change that.
Here’s everything you need to know.
Enjoy your weekend,
