How Walmart Is Bouncing Back From Its Financial Woes
The truth about Walmart struggling financially is that it's, in part, due to the extraordinary inflation that has been decimating the entire retail industry, per CNBC. Walmart's financial performance is seen as influential by analysts in shaping investor perceptions of other major retail stocks, such as Target and Costco, not to mention of retail stocks in general (via TheStreet). But Walmart is also vulnerable, in and of itself, to perceptions the retail industry is struggling at this time, per Deloitte. The upshot is that Walmart share prices have been volatile throughout the 2022 calendar year, and as of Monday, June 6, are down to $125 per share from $144 on the first day of 2022 trading (via Yahoo! Finance).
That said, the drop in Walmart's share price is not disconnected from how the retail giant has been performing business-wise, which is to say, its earnings (i.e., profits minus expenses). As Zacks points out, one significant nosedive coincided with Walmart having announced disappointing earnings for its first financial quarter of 2023. What may have struck investors as particularly worrisome is that inflation may only be partly to blame, according to Barron's, which points out Walmart's falling profits were recorded despite an increase in its sales. Zachs attributes this to increased supply chain costs and simply having curated the wrong inventory for its customer base. If so, then correction may require a shift in Walmart's focus. Fortunately, Walmart is apparently ready and willing to make the necessary changes.
Bouncing back may require Walmart to pivot somewhat in its focus
It has come to Walmart's attention, as well as the Wall Street retail analysts who follow it, that Walmart regaining investor confidence may well require a shift in its business model so as to deliver to its customers what they're actually interested in purchasing in this challenging economic climate. And that may not be what those same customers have been interested in purchasing in the past. To wit, consumers have lately been shifting the focus of their spending away from goods — which they purchased in abundance during the height of the pandemic — and toward services, according to Barron's analysis of the factors that have contributed to Walmart's financial woes of late.
As retail analyst Robert Ohmes noted in connection with maintaining a Buy rating for Walmart stock, the target price of which he has speculated to be $160 (it's currently hovering at around $125, per Yahoo! Finance), Walmart has not only expressed a willingness to "diversify its business," but it has also been putting its money where its mouth is, per Benzinga.
As Ohmes noted, Walmart is in the process of deepening its "customer engagement with Health & Wellness, Financial Services, and the Walmart Plus membership program." At this time, we can't speak to how Walmart might monetize Health & Wellness and Financial Services. However, since Costco's membership program is among its secret weapons, it becomes apparent why Walmart is open to moving in this direction.