Please ensure Javascript is enabled for purposes of website accessibility

Walmart and Capital One Strike a Deal -- What’s in It for Each of Them?

By Jennifer Saibil – Sep 23, 2019 at 6:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The two heavy hitters unite to offer a more competitive user experience for customers.

Capital One Financial (COF -1.61%), the nation's seventh-largest bank, and retail giant Walmart (WMT -1.93%) announced an agreement last week to leverage both of their strong arms to capture greater market share in each of their respective segments. 

The companies are launching what they call a "digital-first" program that makes signup and shopping easy while offering customers a compelling rewards schedule. "Capital One and Walmart have combined our expertise to deliver a product that is in line with our shared passion of making customers' lives easier and more rewarding," said Daniel Mouadeb, senior vice president and head of Walmart partnership at Capital One. 

Young woman holding a smart phone and a credit card

Image source: Getty Images.

Some of the rewards the card offers are:

  • 5% back on all purchases.
  • 5% back on all in-store Walmart purchases for the first 12 months.
  • 2% back on restaurant and travel.
  • 1% back on everything else.

The digital-first part of the card means that customers can apply and get approved through their smartphones within minutes, so they can use the card as they're completing a purchase. If customers have Walmart Pay, the card can be stored in the app immediately. 

Why it works for Walmart

Walmart already sells about 20% of all groceries in the U.S., but Amazon is chipping, or maybe hacking, away at the grocery market. At this point, online grocery shopping is still in its infancy -- it only amounts to 2% of total supermarket shopping. 

Amazon has made several attempts to break open online groceries, its most recent attempt being the buyout of Whole Foods. It will also introduce Amazon Go supermarkets, where customers log in and don't need to wait in checkout lines, within the next two years. It currently offers a Visa credit card that gives 5% back on Amazon orders as well as other rewards. 

Walmart already has a credit card rewards program as well, but this one knocks its socks off, and Walmart needs to keep pace so as not to lose its competitive market share. However, investors aren't worried about Walmart, now the third-largest online retailer behind Amazon and eBay and one of the most resilient consumer staples stocks on the market. Building its online presence is only more good news. 

Where Capital One stands 

Capital One has had an interesting year. The company's first-quarter results in April were very positive, with high revenue and earnings per share (EPS) that beat expectations and its stock price surged. 

In July, though, the company announced a huge data breach that left more than 100 million customers' information compromised, and share price slipped from over $100 to $85. It will be expected to pay somewhere between $100 million and $150 million in 2019 in legal fees and related costs, which will dilute their revenues and EPS. 

However, large data breaches have happened before to other large companies such as Target and Home Depot, and they quickly bounced back. A new chapter in Capital One's story helps the company move past the July debacle, picking itself up off the floor to open a fresh page that highlights its commitment and dedication to plowing forward, seeking innovation, and improving its relationship with its customers. The company also stands to greatly benefit from Walmart's powerful market share and high sales volume, which keeps increasing annually, topping $514 billion in 2018.

The new card is set to roll out on September 24, with both Walmart and Capital One anticipating greater sales.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Visa. The Motley Fool has the following options: short February 2020 $205 calls on Home Depot, short October 2019 $37 calls on eBay, long January 2021 $18 calls on eBay, and long January 2021 $120 calls on Home Depot. The Motley Fool recommends eBay and Home Depot. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Walmart Stock Quote
$129.70 (-1.93%) $-2.55
Capital One Financial Corporation Stock Quote
Capital One Financial Corporation
$92.17 (-1.61%) $-1.51
Target Corporation Stock Quote
Target Corporation
$148.39 (-2.24%) $-3.40, Inc. Stock Quote, Inc.
$113.00 (-1.57%) $-1.80
eBay Inc. Stock Quote
eBay Inc.
$36.81 (-2.33%) $0.88
Visa Inc. Stock Quote
Visa Inc.
$177.65 (-1.34%) $-2.41
The Home Depot, Inc. Stock Quote
The Home Depot, Inc.
$275.94 (-0.86%) $-2.39

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.