3 Reasons Walmart Is a Must-Buy for Long-Term Investors

Walmart, the world’s largest brick-and-mortar retailer, has been pushing the envelope for becoming a tech-centric company from being a traditional retailer. It has shifted its focus and strategies to become a high-tech innovator. For nearly a decade, Walmart has been investing heavily in technologies and startups and is one of the reasons that it still sits on the throne of the Fortune 500 Company List despite seeing immense competition from its rivals such as Amazon. For the fiscal year 2022, Walmart set an investment of $14 billion for automation, technology, and other business areas like supply chain and customer-facing initiatives. And not just in technology but the company is also planning to hire thousands of the workforce in 2022 including cybersecurity professionals, architects, developers, software engineers, data scientists, data engineers, technical program managers, and product managers. It makes one wonder – What made Walmart take that approach? What strategies did it use to overcome the challenges it had been facing? We did some digging and found a lot of insights that other businesses can take a lesson or two. These insights include Walmart’s patent strategy, its similarity to Amazon’s strategy, the innovations Walmart is working on, and how it is integrating next-gen technologies to improve every area of its operations.



Walmart's strategic focus on high-margin businesses and omni-channel investments positions it for long-term growth by enhancing its competitive edge and driving profitability. By shifting towards higher-margin sectors such as advertising and technology, Walmart can achieve better profit margins compared to its traditional retail operations. For instance, the acquisition of VIZIO for $2.3 billion signifies Walmart's commitment to attracting higher-income consumers and expanding into high-margin sectors, which can lead to increased revenue and profitability. Additionally, Walmart's omni-channel strategy, which integrates physical and digital shopping experiences, provides unparalleled convenience to customers. This approach not only boosts customer satisfaction but also reduces operational costs significantly. For example, Walmart's customers can order online and pick up in-store, thanks to the seamless integration of its logistics and inventory systems. This omnichannel presence allows Walmart to leverage its extensive physical store network to optimize its supply chain and enhance its digital analytics capability, providing sustainable growth. Investors can evaluate the success of these initiatives by tracking specific metrics such as U.S. comparable sales, earnings per share (EPS), and the growth in high-margin business segments. For instance, analysts anticipate a 3.8% comp for Q3 and a strong rise in EBIT growth, supporting a favorable EPS outlook. Additionally, the anticipated increase in advertising revenue and strong U.S. comparable sales are likely to enhance financial performance, potentially justifying a higher valuation multiple. By monitoring these metrics, investors can assess Walmart's progress in achieving its strategic goals and evaluate the effectiveness of its high-margin and omni-channel investments.



Walmart faces several potential risks and challenges that could impact its long-term investment potential, particularly in light of macroeconomic pressures and industry consolidation. One of the primary risks is macroeconomic pressures, including inflation and industry consolidation. The company is navigating uncertainties tied to the presidential election cycle and holiday calendar challenges. While fuel and foreign exchange assumptions have shifted to provide a modest tailwind, potential risks remain, such as demand moderation post-Q2, wage inflation, and increased competition. Additionally, Walmart's strategic focus on high-margin businesses and omni-channel investments may mitigate some of these risks. Analysts have noted that if the company misses Q2 targets or lowers its second-half EPS outlook, its stock could experience a mid to high single-digit percentage drop. Nevertheless, Walmart's competitive edge is reinforced by its investments in e-commerce and market share gains. Furthermore, Walmart's commitment to innovation and customer service continues to set it apart in the competitive retail landscape. As Walmart navigates challenges and capitalizes on opportunities, its performance will be closely watched by investors and industry observers alike. The company's robust market presence, strategic initiatives, and adaptability position it well for future growth, even amid economic uncertainties.

Walmart's commitment to innovation and customer service is evident through its significant investments in technology and automation, which have positioned it as a leader in the retail landscape. For instance, Walmart has set aside $14 billion for automation, technology, and other business areas like supply chain and customer-facing initiatives for the fiscal year 2022. This investment underscores Walmart's dedication to transforming its operations and enhancing the customer experience. By focusing on technology, Walmart aims to become a high-tech innovator, shifting away from its traditional retail model. This strategic move is reflected in the company's hiring plans, which include thousands of cybersecurity professionals, architects, developers, software engineers, data scientists, data engineers, technical program managers, and product managers. These hires are crucial for driving innovation and ensuring that Walmart remains at the forefront of technological advancements in the retail industry. Walmart's investments in technology and automation have also led to the development of innovative solutions that enhance customer service. For example, the company has introduced a GenAI-powered search experience, which allows customers to search by specific use cases, generating more relevant and cross-category results. This feature simplifies the shopping process, making it more efficient and personalized for customers. Additionally, Walmart's Virtual Try-on technology for fashion and View in Your Home (Home AR) feature enable customers to visualize how clothing and home goods will look in their living spaces before making a purchase, improving the shopping experience and reducing returns. Furthermore, Walmart's strategic initiatives, such as the acquisition of VIZIO for $2.3 billion, demonstrate its commitment to attracting higher-income consumers and expanding into high-margin sectors. This acquisition, along with Walmart's investments in digital advertising, Walmart Plus, and automation, is expected to drive productivity and improve profit margins. These strategic moves differentiate Walmart from competitors by enhancing its competitive advantage in the retail landscape. Walmart's focus on high-margin businesses and omni-channel investments may mitigate risks and position the company for future growth, even amid economic uncertainties.