Many people think America is on the verge of a recession. As a result, many investors will wonder if America’s largest discounter Walmart (WMT) thrive to.
Walmart (NYSE:WMT) could benefit from a recession because of its notorious low prices. Interestingly, Walmart is cutting prices to help shoppers adjust to inflation, Business Intern reports. Additionally, Walmart will offer lower-cost alternatives to certain items to help inflation.
However, Walmart will have to raise food prices because of inflation, CFO Brett Briggs admits. Briggs says Walmart will cut prices on sporting goods and equipment to keep sales going.
Walmart will try to keep prices low on “low priced items,” such as milk, tuna and bread, CEO Doug McMillon promised in May. To explain, “price point” items are the staples that families buy in any economy.
Can Walmart grow in a recession?
Interestingly, the revenue growth shows that McMillon and Briggs’ strategy is working. Stockrow estimates that Walmart’s revenue growth rate increased from 2.36% in the quarter ending April 30, 2022 to 8.37% in the quarter ending July 31, 2022. Conversely, Walmart’s revenue grew only 0.52% in the quarter ending Jan. 31, 2022.
Walmart’s quarterly revenue increased from $141.469 billion on April 30, 2022 to $152.859 billion on July 31, 2022. I calculate that Walmart’s revenue increased by $11.29 billion in the last quarter. So yes, Walmart grows in a recession.
Walmart Inc. (WMT) earn more money. Quarterly gross profit decreased from $34.772 billion as of April 30, 2022 to $37.021 billion as of July 31, 2022. However, quarterly revenue decreased from $37.349 billion as of January 31, 2022.
In contrast, quarterly operating profit decreased from $5.318 billion as of April 30, 2022 to $6.854 billion as of July 31, 2022. However, quarterly operating profit decreased from $7.354 billion as of July 31, 2021 to $5.887 billion as of January 31, 2022.
I conclude that people buy more at Walmart but spend less money. To elaborate, people are buying groceries at Walmart due to rising inflation. Conversely, people who buy less expensive goods such as televisions for fear of inflation.
How much money does Walmart (WMT) generate?
Walmart (WMT) can generate huge sums of money. For example, it declared a quarterly operating cash floor of $12.988 billion as of July 31, 2022.
Quarterly operating cash flow increased from -$3.758 billion as of April 30, 2022 to $7.98 billion as of January 31, 2022. However, Walmart has borrowed $5.315 billion of this cash. Walmart reported quarterly financing cash flow of $5.315 billion on April 30, 2022.
Quarterly financing cash flow fell to -$6.715 billion as of July 31, 2022. So Walmart could generate $12.988 billion in cash and pay off $6.715 billion in debt in one quarter. Conversely, Walmart’s quarterly cash flow fell from $11.882 billion on April 30, 2022 to $2.108 billion on July 31, 2022.
Walmart had $13.923 billion in cash and short-term investments as of July 31, 2022. Cash and short-term investments increased from $11.817 billion as of April 30, 2022 to $22.831 billion as of July 31, 2021.
What value does Walmart offer?
I think Walmart (WMT) offers tremendous value as it generates cash and adds value in times of recession. However, Walmart lost value.
For example, Walmart’s total assets grew from $246.142 billion on April 30, 2022 to $247.199 billion on July 31, 2022. Total assets grew from $238.552 billion on July 31, 2021.
Additionally, Walmart’s total debt decreased from $66.917 billion as of April 30, 2022 to $65.309 billion as of July 31, 2022. However, total debt decreased from $57.323 billion as of January 31, 2022 to $60.879 billion. as of July 31, 2021.
So Walmart pays its debts, adds value, and accumulates cash during a recession. Therefore, I view Walmart as a valuable investment that can grow in a recession.
Is Walmart a value investment?
Attractively, Walmart’s stock price fell. Mr. Market paid $147.70 for WMT on August 30, 2021 and $132.55 for Walmart on August 31, 2022. I think Mr. Market is undervaluing Walmart, making it worth it in today’s stock market.
Walmart’s value features include a wonderful dividend. Walmart has scheduled eight quarterly dividends of ₵56 between September 6, 2022 and July 3, 2024. Walmart shares paid a forward dividend of $2.24 and a forward dividend of 1.69% on August 31, 2022.
If you need a value stock that can grow and generate dividend income during a recession. I recommend Walmart (NYSE:WMT). So yes, Walmart is a value investment that I consider a widows and orphans stock.
What value does Walmart offer?
Walmart’s value includes 4,742 stores and 210 fulfillment centers in the United States. Statista estimates that Walmart operated 370 discount stores, 799 Neighborhood Markets and 3,573 Supercenters on July 27, 2022.
Thereby, Walmart (WMT) has one of the largest retail footprints in the United States. Additionally, Walmart claims to have stores located within 10 miles of 90% of the US population.
If true, Walmart operates stores within 10 miles of 301.769 million Americas. To explain, WorldoMeter estimates that the United States had a population of 335.241 million in August 2022 and 90% of 335.241 million is 301.769 million.
Moreover, Walmart is a major player in e-commerce. Walmart operated 31 e-commerce-dedicated fulfillment centers in the United States as of July 3, 2022. Additionally, Walmart plans to build four next-generation fulfillment centers over the next three years, a press release reveals.
Walmart accelerates e-commerce
Walmart is partnering with Austrian logistics automation company Knapp to automate these fulfillment centers. Knapp’s system uses bots, strict automation, and machine learning to speed up the execution process.
Walmart says Knapp’s system can reduce the fulfillment process from 12 steps to five steps. In particular, they claim that the Knapp system can pick and pack items for shipment in less than 30 minutes.
They tested the Knapp technology in a distribution center in Pedricktown, New Jersey. Walmart hopes to open the first new fulfillment center in Joliet, Illinois this summer.
Additionally, they claim the Knapp process can double the number of orders a fulfillment center can process in a day. Additionally, Walmart says the new fulfillment centers could reach 75% of the US population with one- or two-day shipping. Walmart also says it could reach 95% of the US population with one or two day shipping if they combine new old and fulfillment centers.
Walmart e-commerce is growing
Thereby, Walmart (WMT) can cash in on expensive gas and inflation with a growing e-commerce fulfillment system.
Statista estimates that Walmart is the second largest U.S. retail e-commerce company with 6.3% of the U.S. market in June 2022. In contrast, the largest U.S. e-commerce company held 37.8% of the U.S. market in June 2022 .
Walmart’s online sales increased 11% in fiscal 2022 and 1% in the quarter ending July 31, 2022, Supermarket News reports. Walmart’s online sales increased 90% from fiscal 2020 to the end of fiscal 2022 (July 2022), Supermarket News complaints.
How Inflation Can Help Walmart Grow
Therefore, Walmart’s e-commerce is growing and is about to grow further. I think Walmart’s e-commerce will grow if inflation gets worse and recession comes.
The US inflation rate rose from 5.25% in August 2021 to 8.52% in July 2022, estimates Statista. Although inflation has slightly decreased to 9.06% in June 2022.
I think inflation could rise because Federal Reserve Chairman Jerome Powell thinks higher inflation and higher interest rates are likely. Powell said the Fed will need to keep raising interest rates to fight inflation over the next few months at a conference Aug. 26 in Jackson Hole, Wyoming, NPR reports.
Therefore, Powell fears that inflation will continue to rise, which may be good for Walmart (WMT). To explain that inflation is rising, families will have to cut costs, which means more visits to Walmart and Walmart.com stores.
If you want a dividend-paying value stock that could grow with inflation. I think you need to investigate Walmart Inc. Stores (NYSE: WMT).