Robinhood may have a reputation with some market followers as a platform for risk-hungry speculators, but that isn't always the case. Walmart (WMT -0.73%) and Nike (NKE -0.45%) are two popular blue chip companies that rank on the top 100 most widely-held stocks on the platform. Let's explore the reasons why they look poised to reward investors going forward.
Walmart's e-commerce strategy can boost growth
Walmart is a large-cap supermarket retailer that sells everything from groceries to electronics at everyday low prices. The company can thrive during the pandemic because of its $98 annual unlimited delivery service, Walmart Plus, that allows consumers to buy their groceries online while social distancing. The new strategy can help drive long-term growth even after the pandemic is over by taking market share from e-commerce rivals.
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The data is in, and Walmart Plus may be evolving into a viable competitor to Amazon, which controlled 47% of all U.S. online sales in 2019, according to eMarketer. Walmart captured just 4.6% of that market in the same period, but its share may improve dramatically as the Walmart Plus platform gains momentum.
Piplsay Research estimates that 11% of Americans subscribed to Walmart Plus within two weeks of its launch, with 19% of those customers migrating away from its strategic rival, Amazon Prime. The migration isn't surprising, because Walmart's extensive network of physical stores may give it an advantage in last-mile delivery for perishable items.
The company has 6,100 locations around the globe fulfilling grocery pick-up and delivery orders, and its next-day delivery service is available to 75% of the U.S population. In contrast, Amazon's grocery chain, Whole Foods, only has around 500 total locations.
Walmart's global revenue jumped 5.6% year over year to $137.7 billion in the fiscal second quarter. U.S. comparable-sales growth came in at 9.3%, and e-commerce revenue soared 94% to represent $10.5 billion of the company's $93.3 billion in U.S. revenue.
Nike's digital transformation is taking shape
Nike is an iconic American apparel company known for its shoes and athletic gear. Like Walmart, the company is using the coronavirus pandemic as an opportunity to expand its digital sales channel and streamline its operations. This strategy could potentially boost margins and profits long term.
Nike faced some negative impacts from the coronavirus pandemic, which closed stores and disrupted supply chains in the fiscal fourth quarter. But the shoemaker recovered substantially in the first quarter of fiscal 2021, generating revenue of $10.6 billion. This figure was down 1% from the prior-year period but up 68% against the previous quarter.
The company is also experiencing an exciting acceleration in digital adoption among its consumers. Its online business grew 83% in the fiscal first quarter and now represents 30% of all sales. This trend should be good news for the bottom line, because according to CFO Matt Friend, Nike earns a 10-point higher gross margin rate on digital sales over its wholesale business.
Nike is also using its digital transition as an opportunity to streamline operations through aggressive layoffs. The company plans to eliminate 700 positions at its Oregon headquarters by 2021 as it restructures its business around online sales. Net income grew 11% to $1.52 billion in the first quarter. The digital transformation should help drive continued bottom-line growth over the long term.
Brands that can stand the test of time
Nike and Walmart are iconic American brands that have served customers for almost 60 years, and that's likely a contributing factor to their popularity on Robinhood. Both companies have also used the coronavirus pandemic as an opportunity to digitize their business models, and this could generate superior returns for investors by creating more growth opportunities and boosting margins.
