The stock market renewed its worries recently as two banks collapsed, raising fears about this spreading throughout the financial system like it did during the Great Recession. Over the past year, the S&P 500 has dropped by more than 12%. But during these uncertain times, astute investors can also pounce on opportunities.
Walmart (WMT 0.18%), the world's largest retailer, hasn't fallen as sharply as the overall market. The stock has declined by 4% during the past 12 months, but the share price remains 13% lower than the all-time high reached in early 2022. That makes this an opportune time to explore Walmart's long-term prospects to see if the share price represents a buying opportunity.
Consumers trade down
Walmart has a long track record of keeping costs down to maintain ultra-low prices for its customers. This has been perfected over the last six decades since opening its first discount store.
Customers know they can go to Walmart for rock-bottom prices. That's always appealing but never more so than during tough economic times. Many economists continue to forecast a U.S. recession sometime this year, and the banking situation could quicken the pace as lenders become more cautious. During these times, consumers typically trade down to seek values at places like Walmart.
For instance, sales growth accelerated during the early days of the pandemic. In fiscal 2021, which ended on Jan. 31, 2021, Walmart's U.S. stores produced an 8.6% same-store sales (comps) increase. That bodes well for the company in the event of an economic slowdown. Some people were disappointed by management's fiscal 2024 guidance, which called for U.S. comps to increase by 2% to 2.5%.
I'm more sanguine. Walmart continued to gain market share in groceries, a competitive area, that will benefit the company over the long haul.
Investing for the future
Fortunately, Walmart isn't standing still in the face of intense online competition from the likes of behemoth Amazon (NASDAQ: AMZN). Management launched its first e-commerce sites in 2000, and it has continued to invest in technology.
This includes Walmart+, its subscription service that offers access to the streaming service Paramount+, discount gas, and convenient delivery, among other benefits. In its latest fiscal year, covering the period that ended on Jan. 31, e-commerce sales grew by 12%.
Walmart has outlasted rivals for decades. Not standing pat will allow the company to not only survive but continue thriving in the coming years.
While Walmart continues to invest for the future, including an advertising business that grew by almost 30% to $2.7 billion last year, the board of directors has been able to raise dividends annually for decades.
Since 1974, Walmart has increased payouts. This includes the decision to boost next month's quarterly payment by a penny to $0.57. The stock's 1.6% dividend yield only slightly trails the S&P 500's 1.7%, and it's good to know that you can rely on Walmart increasing payments annually.
Walmart remains an attractive investment despite the stock price drop. It's very difficult to undercut the company's prices, and its focus on making Walmart a convenient shopping destination through technology makes it likely that the company will remain ahead of competitors. The share price well below the all-time high makes Walmart a compelling opportunity for patient investors.