Why Walmart is emerging as a consumer favorite: Analyst

As consumers grapple with the reality of rising costs, finding ways to maximize their budgets has become essential. LSEG Director of Consumer Research Jharonne Martis joins Wealth! to discuss why she believes Walmart (WMT) is a frontrunner.

According to Martis, Walmart's recent quarterly results provide "a clear indication" that the retail giant is a place where consumers can get the most value for their money. She notes that consumers shop at Walmart not only for their grocery needs but also for general merchandise, a trend that was evident in the company's robust results.

While acknowledging that consumers are feeling the pinch of inflation, Martis highlights that they are gradually opening their wallets for general merchandise purchases, as demonstrated by the retail sales report and Walmart's strong sales numbers. "We are seeing that consumers are willing and able to extend themselves," she says.

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This post was written by Angel Smith

Video Transcript

Walmart CFO told Yahoo Finance earlier today that the consumer is relatively consistent but is America's largest retailer the best place to maximize your dollars here to weigh in.

We've got Jerome Martis who is the LSEG Director of Consumer Research.

Great to have you here in the studio with us.

It's great to be here.

I mean, we've been talking about the consumer over different economic cycles for several years now.

You and I, and one of the huge things that we're thinking about with Walmart here is how they play within this broader competitive landscape and consumers trying to figure out where they're getting the best bang for their buck.

Is it clear where that is right now among the competitive landscape?

I think today's numbers give us, give us a clear indication that that place is Wal Mart.

That's the place where consumers gravitate for groceries.

And while they're there shopping for groceries, they're definitely opening up the wall, the wallets for general merchandise.

Now, what was great today is that not only is Wal Mart, you know, seeing strength within the store and groceries, but also online.

In fact, they smashed their e commerce expectations of 15% with a robust 22% today.

Um The marketplace sellers have grown by 36% suggesting that they keep adding more um sellers onto their um e commerce platform.

Also, you know, um their advertisement business grew by 24% which is actually on par with Amazon's 24% increase in r you think about how Walmart is describing the consumer right now, the CFO of Walmart, John David Rainey telling us in an interview earlier today, that wallets are stretched, that the consumer is consistent, uh relatively consistent here.

Uh And they talked about how this factors into their guidance going forward without kind of looking specifically at the financials here.

How would you describe the state of the consumer right now?

So it's interesting because we've actually seen the consumer um started to open up their wallets for general merchandise and that was very evident even in yesterday's April us retail sales numbers.

Um we saw that clothing was up um in the month of April despite April being a flat month.

And on top of that, in a collaboration with centric market intelligence SAC discovered that the amount of merchandise and the average discount in 2024 is significantly lower than what we've seen over the last three years.

So this is telling us that despite the fact that they are lower mark downs, consumers are still opening up, they're starting to open up their wallets for general merchandise and that was very evident in Walmart's numbers today too.

They said that despite, so everybody goes to Walmart for the lower everyday prices and the, um, rollbacks.

But despite having lower roll backs, we saw that same store sales were still very strong.

So we're saying that consumers are willing and able to extend themselves.

And why is this is because their security in their, in their job right now that the consumer Confidence reports are telling us, you know, that the consumers feel very secure in their job and that's why they're spending, they're feeling better about extending themselves a little bit more.

It feels like every week we hear a new iteration of what a rewards platform looks like for all of these retailers, whether it's Wal Mart, whether it's target, whether it's Amazon as well, all these things considered, where is the best kind of rewards relationship that consumers are experiencing with these retailers?

I think one thing that was very evident in E com in, in Walmart's ecommerce numbers is the fact that more consumers are learning to trust its omni channel platform, right?

Think about all the people, we just talk about the pandemic, right?

About how you had to stay at home and order online or wait outside, waiting outside.

My goodness for groceries.

Yeah.

So think about all the amount of people that Walmart gained during the pandemic on their E commerce and on top of that astronomical gain, they now posted another 22% growth.

That's huge.

Um, one advantage that Walmart has over Amazon or the other competitors is its location, right?

Um, Walmart is located, uh, it's prox proximity is to 90% of the US population.

You know, it has a store within 10 miles of 90% of the US population.

So because of this, we saw today for the first time that Walmart saw stronger deliveries than, you know, store fulfillment.

So they're using the stores very wisely.

And this is actually their upper hand that they have on, on, on Amazon, you know, that they're using the stores, their proximity to the consumer.

And the fact that now consumers have learned to trust them is health care or the pharmacy benefits.

Part of each of these programs or each of these storefronts, is that the next major competitive element for all of these businesses?

Absolutely.

We're saying that, um, that is the big driver.

Um, we've seen that for Walmart, um, especially this year.

Others are also trying to compete at.

Um, Costco has always been a favorite even with when it comes with prescriptions.

But yes, when it comes to, uh, matters of health, you know, that always gives a discount or an upper hand.