Shares of Walmart (WMT) have been steadily climbing higher in recent months, and are now up more than 15% year to date. Indeed, the big-box retailer is having its way as consumers continue to flock to retailers that promise the most savings. It's not just Walmart's ability to offer everyday low prices that makes it such a juggernaut at a time like this. The company has also invested to adapt to the digital age, allowing it to to catch up with the likes of disruptive behemoths like Amazon (AMZN) - which recently got slapped with an FTC antitrust suit for having an illegal monopoly.
It may be hard to believe, but Walmart stock has actually outperformed Amazon over the last three years. While Walmart is fresh off a new high of around $166 per share, Amazon stock is still struggling to climb back after the 2021-2022 selloff cut the shares' value in half.
Now, Amazon is still one of the most disruptive innovators out there. It has growing skin in the generative artificial intelligence (AI) game, and new updates to Alexa for the ChatGPT era could reignite the AI hype. Still, Walmart has held its own incredibly well on the retail side of things, and could continue riding higher in this demanding environment.
Perhaps Berkshire Hathaway (BRK.B) was wrong to give up on the legendary big-box retailer a few years ago as Amazon continued its rapid ascent in the wildly competitive retail scene. As high rates look to add a bit of wobble to the economy's coming landing, I'd be willing to bet Walmart stock could continue to outpace Amazon.
Walmart: Things Look Bright Going Into Year's End
I don't know anybody who actually enjoys shopping at Walmart. Regardless, people continue to flock to stores in an attempt to get a good value for their money. In a time when inflation is out of control, and the economy seems to be on potentially wobbly legs, it's nice to have a high degree of price certainty. Few retailers, other than perhaps Costco (COST), can offer the magnitude of price certainty as Walmart.
Inflation may have pulled back substantially in recent quarters, but ask your average grocery store shopper, and they probably won't notice any relief. Undoubtedly, food inflation is running hotter than many other goods. And unlike other discretionary items, which can be pared back in difficult times, there really is no avoiding food price inflation.
As grocery CEOs bear the blame for higher prices, we could see further action to drive down food inflation. In the meantime, look for shoppers to continue taking their business over to Walmart over Whole Foods - or any other grocer that can't compete on the pricing front.
For the current fiscal year, Walmart looks poised to enjoy mid-single-digit revenue growth. The company's CEO, Doug McMillon, likes where his firm is headed in the back half as concerns grow about the state of the economy. McMillon is less concerned about "whether the economy grows or shrinks," as he's incredibly confident that "if people are value-conscious, they'll come our way."
Walmart Poised to Win as Value Consciousness Remains Elevated
Indeed, shoppers have been incredibly value-conscious, and will likely continue to be until inflation - specifically food inflation - is put to rest. At this juncture, the Federal Reserve isn't close to acknowledging that it's about to win the fight against inflation. It's keeping rates high, and is hinting at more rate hikes to come. The persistence of inflation has been a thorn in the sides of many consumers. So, it's good to hear the Fed isn't backing down as we move into the later rounds of the epic battle with price increases.
All things considered, investors shouldn't expect value consciousness to dissipate anytime soon. The scars of runaway inflation could take a while to heal. All the while, Walmart will continue to do its best to save its customers money, keeping them coming back for their weekly grocery runs.
As of this writing, shares of WMT trade at 31.1 times trailing price-to-earnings. That's a tad stretched - but warranted, in my opinion, given its premier defensive growth traits.
The Bottom Line
Walmart doesn't need a solid economy to thrive. Should markets continue to struggle amid concerns over economic growth, expect Walmart to keep slowly and steadily marching higher. Even near its highs, the stock continues to look like a great buy.
On the date of publication, Joey Frenette had a position in: AMZN , BRK.B . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
