Investors are eager for the next bull run in the stock market to commence. After watching the prices of many stocks languish over the past year or so, it's easy to understand why.
But one of the great aspects of Walmart's (WMT -0.15%) business is that it doesn't need the economy to be strong to thrive. So rather than waiting for the next bull market to take hold, you might want to consider buying the all-weather retail behemoth's shares today.
Here's why.
1. Walmart is an inflation fighter
Walmart's enormous scale allows it to pressure its suppliers to deliver the best prices possible to its customers. The retailer, in turn, has a well-earned reputation among consumers for its "everyday low prices."
This reputation is particularly valuable during challenging economic periods. Walmart tends to enjoy a sales boost when shoppers become more cost-conscious and seek out value-priced goods. Evidence of this can be seen in the company's financial results for its fiscal 2023 fourth quarter, which ended on Jan. 31. Walmart's U.S. comparable sales grew by 8.3%, while its Sam's Club comps jumped 12.2%.
Walmart intends to maintain pressure on consumer goods companies to keep their prices as low as possible in the coming year. The retail giant is also promoting its own private-label products as another way for bargain-hunting shoppers to save money.
2. Walmart is winning in the $850 billion grocery market
With more than 4,700 locations across the U.S., Walmart has a store within 10 miles of 90% of Americans' homes. This ubiquitous store base forms a vast network from which the retailer can fulfill its e-commerce orders. This is why Walmart can offer free delivery to Walmart+ members for orders priced as low as $35, even as rival Amazon (AMZN -0.16%) was recently forced to raise the minimum order size that qualifies for free delivery from $35 to $150 for its Fresh grocery service.
Walmart has also invested heavily to enable its stores to serve as pickup centers for online orders. Curbside pickup services have become popular during the pandemic, and they're likely to remain so now that people have come to enjoy the added convenience they provide.
Low-cost delivery and convenient pickup stations are two reasons why Walmart accounts for roughly a quarter of all grocery sales in the U.S., compared to only about 2% for Amazon. And Walmart is gaining market share, while Amazon and other competitors cede ground.
3. Advertising could boost Walmart's profits
Despite its leading presence in the grocery and discount retail markets, Walmart's margins typically check in at only around 3% to 4% per year. That's the nature of the highly competitive retail industry.
Yet one area of Walmart's business enjoys sky-high profit margins, and it's poised to grow much larger in the coming years: Advertising. At a recent investor conference, chief financial officer John Rainey said Walmart's advertising margins could reach as high as 70% to 80%.
Rainey said marketers are increasing their spending on the company's ad network as it grows its e-commerce business. Walmart's online sales jumped 17% in the fourth quarter. Its advertising revenue, in turn, grew by more than 20%.
All told, Walmart's ad revenue rose by 30% to $2.7 billion in fiscal 2023. Notably, much of these gains came during a period when digital ad giants Meta Platforms and Alphabet saw their sales growth stall, due in part to the current challenging economic environment. Analysts believe Walmart's ad sales could accelerate when the economy eventually strengthens. Insider Intelligence, for one, thinks Walmart's ad growth could top 40% in the year ahead.
