Hello,
Please take what I share as opinions and a presentation of data.
Let’s get into it.
When you hear the word Walmart, you think of hill billy Jim walking around smelling like last Wednesday, browsing through the overalls section while coughing COVID-19 molecules on all the denim.
When investors hear the word Walmart, most of them envision a money-printing machine.
Ranking 18th on the list of the world’s largest companies, it is 2nd only to Amazon (3rd to Apple, if you consider it retail) in a long list of retailers. Let’s see how they grew to that size.
This article describes what they sell but I’ll save you a click and sum it up for you:
Motherfucking everything.
What most people miss on Walmart is they just don’t sell physical products, which range from electronics, clothing, makeup, home improvement, groceries, etc. They also provide a range of services geared towards helping low-income individuals (their main demographic).
Some of these services include, but are not limited to:
Banking
Tax auditing
Money transfers
Healthcare (pharmacy)
Automobile
Jerking you off in the sports section (kidding)
While the majority of their revenue does come from retail purchases, Walmart is continually looking for ways to generate more income by becoming price competitive on services that are price-friendly to the lower-income audience. One awesome example is their expansion into the healthcare space.
In June, they began selling insulin at 40-60% off regular cost. While it on paper this probably won’t drive up immediate revenue, it establishes a foundation for diabetics to start using Walmart for their insulin needs. It’s a smart as fuck way of helping people save money while driving foot traffic into Walmart.
Another large money-maker for Walmart is their international expansion.
We all know China is the world’s largest market, and Walmart is aggressively expanding their market share in the retail space there.
In addition to their plan to add 500 stores in the next few years, they’re integrating intelligently with local industry leader’s like JD.com to appeal to Chinese consumer trends (like on-demand delivery).
Expansion of services and penetrating international markets are just a couple examples of ways Walmart is looking to keep ahead of the curve. If you’ve noticed over the past years, Walmart and Amazon are essentially two heavyweights going back and forth in becoming the one-stop retailer for everything, whether that’s products or services. They both have room to grow, but imo Walmart has longer-term growth cause of their ability to focus on their consumers only, while Amazon is expanding in other aspects of business like cloud services. Did I also mention Walmart own’s Sam’s Club?
If you’re looking to play this upcoming ER, keep in mind there is a non-trivial bear case of supply chain issues that could pose as a large headwind for Walmart. Considering their business model of selling everything, and having plenty of everything to sell, they can be suffering from this headwind enough to lower future guidance.
Another bear case is the 100’s of mcdonalds locations that used to be inside walmarts, closing. This was a foot traffic driver as well as rent-cost padder. There are talks about another partnership and more food offerings but I couldn’t find anything.
If you’re not looking to play ER, there’s a strong case to buy and hold Walmart as a long-term stock. They’re not going anywhere, they have an enormous stronghold on their core target audience, and they’re continually expanding their revenue streams to increase revenue per customer. I’m personally a shareholder in my gay ass retirement account and am excited for their future.
There’s a lot I didn’t cover, and always feel free to present bear cases to my bull cases, or vice versa. I’m looking forward to hearing everyone’s thoughts on wally world.
