U.S. inflation hasn’t gotten down to the Federal Reserve’s 2% target – not even close. Indeed, Federal Reserve Chairman Jerome Powell has described the path to 2% inflation as “sometimes bumpy.” However, the inflationary bumps could actually benefit Walmart (NYSE:WMT) and add to the bullish argument for Walmart stock.
Walmart’s management shutdown its health care centers recently. This means that Walmart can focus more of its attention and resources on providing “everyday low prices” on groceries and other household products. Walmart remains a reliable retailer during tough economic times.
Consumer Confidence Is Shockingly Low
I’ve got some good news and some bad news for you. The bad news is that, in April 2024, U.S. consumer confidence fell to its lowest level since July 2022. The good news is that, in January through April 2024, U.S. online retail sales increased by around 7% year over year.
All of this should benefit Walmart. Low consumer confidence steers consumers away from big-ticket, nonessential items, and toward Walmart’s budget-friendly products.
Meanwhile, Reuters noted that the uptick in online retail sales was “driven by demand for cheaper products.”
Vivek Pandya, lead insights analyst for Adobe Analytics, saw “consumers downshift and spend more on the cheapest goods within a degree,” which is “helping categories stay resilient and see continued spending.”
Again, Walmart looks like the winner in this scenario as it offers cheap goods to consumers.
Walmart’s New ‘Cheap-Premium’ Grocery Brand
Staying on the topic of affordable products during this time of sticky inflation, Walmart is introducing what I would call a “cheap-premium” grocery brand. I just made up that term, but I think it fits the groceries that can be purchased at Trader Joe’s and Aldi.
The groceries should be of fairly high quality but only moderately more expensive than the cheapest generic brands. Trader Joe’s and Aldi have become quite popular in this niche grocery category – but now, Walmart is aiming at their market share.
Walmart already has an ultracheap grocery brand called Great Value. The retailer’s new “cheap-premium” brand will be called “bettergoods.”
Note how the brand’s name is stylized with lowercase letters and no spacing. Presumably, this conveys to the consumers that it’s a fancier brand with higher quality and higher prices than Great Value.
Yet, the prices won’t be excessively high. According to Grocery Dive, “[M]ost of the items carrying the bettergoods name will cost less than $5.” So, it will be interesting to see how Walmart’s foray into the “cheap-premium” niche affects the company’s bottom line.
Concerned About Inflation? Buy Walmart Stock.
Sorry to say it, but inflation isn’t going away. It will be a “bumpy” battle against rising consumer prices, but at least shoppers can save money on essential goods at Walmart.
Certainly, data about U.S. consumers’ spending trends seems to favor Walmart as an all-weather retailer. It’s also notable that Walmart will offer a “cheap-premium” brand for folks seeking good quality at reasonable prices.
In a time when saving money is a necessity, Walmart stock is a must-own for your portfolio.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.