Walmart (NYSE: WMT) consumer defensive, recession proof stock and investment opportunities 2023

Jan 16, 2023
6 People Read

By Leroy A. Brown

Walmart Inc. is considered a consumer defensive stock.

Consumer defensive stocks are usually companies that produce food, beverages, tobacco, personal goods, packaging, and household items. It may also include entities that offer educational and training services.

With its size, procurement abilities, strong and widespread brand, e-commerce presence, and multiple revenue streams, Walmart is poised to survive and even thrive during an economic recession or financial crisis.

Thus, Walmart can also be considered a recession-proof stock.



By December 22, 2020, Walmart and Amazon, the two (2) biggest retailers in the United States of America (U.S.A.), made approximately more than US$10 billion combined in extra profits compared to last year. This was an increase of about fifty-six percent (56%).

This increase in sales and profits saw the Walmart heirs – Jim, Rob, and Alice Walton’s wealth increased to about US$40 billion.

Walmart generally does not close unless for a few national holidays.

Therefore, it was no surprise Walmart was open on all days during the Covid-19 pandemic in North America.

Adjusting to the Covid-19 restrictions and requirements was manageable for Walmart and its staff.

Many smaller companies had to close, while Walmart had almost a monopoly as it was one of the few places always open.

With Walmart having hardware, infants, pet, and other departments in addition to its primary money earner - grocery department, it became the one-stop for shopping during the Covid-19 pandemic.



In Canada, Walmart Canada is doing well.

By March 21, 2021, Walmart Canada had closed at least six (6) stores where it has other outlets.

These areas where the stores were closed were Kitchener, Hamilton, and Mississauga in Ontario; Edmonton and Calgary in Alberta; and St. John’s in Newfoundland and Labrador.

Nevertheless, Walmart Canada is investing approximately $500 million in revamping more than four hundred (>400) stores.

Because Walmart was classified as an essential service during the pandemic, Walmart never had to close its stores. Consequently, it raked in record profits in 2020.  

In 2021, through Walmart’s annual incentive program, it paid about $120 million in cash bonuses to its approximately seventy-five thousand (75,000) associates.

The revamping is geared towards making Walmart Canada an “omnichannel," i.e., a place for one-stop shopping by offering customers a seamless way to make purchases across all pathways – in-store, online, and mobile. 

Walmart Canada has started offering more takeout and prepared food. It does this by partnering with brands like Quiznos, Beyond Meat, and the Cheesecake Factory Bakery.

The Covid-19 experience, the revamping efforts, and the ready-to-eat offerings have created over twenty thousand (>20,000) new positions and employment opportunities.

Walmart Canada also installed more self-checkouts.

In Canada, retail is dominated primarily by big box stores like Walmart and Costco.



$3.5 billion 5-year investment

On July 20, 2020, Walmart Canada announced its $3.5 billion 5-year investment plan to increase growth and make customers' "Omni” experience (i.e., shopping online, mobile, and in-store) faster and easier.

By January 4, 2023, the plan was already in motion and involved:



Having “smarter stores” which includes installing more electronic shelf labels, shelf scanners, computer vision cameras, and robotics.



Building two (2) state-of-the-art distribution centers.



Installing tap-to-pay in-store mobile checkout technology.



Having more “micro fulfillment centers” in-store for faster and more timely processing and delivery of online orders.



Implementing telematics and the internet of things (IoT) for more real-time information.



Using artificial intelligence to make some functions easier, like making better plans to ensure customers get the goods they want.



Walmart Canada has partnered with DLT Labs in Toronto, Ontario, Canada, to provide a blockchain transportation payments platform.



Walmart Canada is using more machine learning training software for education and safety.


Walmart Canada Overall

Overall, Walmart Canada operates more than four hundred (>400) stores that serve over one million (>1 million) customers per day.

Walmart Canada employs approximately ninety thousand (90,000) employees.




By the first quarter ending April 30, 2021, Walmart had increased spending by about US$14 billion to improve its distribution network as sales increased.

Sales increased partly as consumers received stimulus payments.

This increase in sales allowed Walmart to have a net income of about US$2.7 billion or approximately US$0.97 per share.

Sales also rose by about three percent (3%) to approximately US$137 billion, which was above analysts’ expectations of US$132 billion.    

Sales in the United States (U.S.), from in-store, mobile and online, increased by approximately five percent (5%) in the quarter ending January 28, 2022.

Grocery and health and wellness were the significant contributors to sales.

Health and wellness did well for Walmart as more people were filling prescriptions, and Walmart was one of the places Covid-19 vaccines were administered.

As of February 17, 2022, Walmart was still the largest retailer in the United States of America (U.S.A.) by revenue, and as such, it was able to absorb a lot of the higher costs associated with supply-chain and wages and was better able to handle labor shortages and other expenses.

By February 17, 2022, supply-chain costs were more than US$400 million over what was estimated at the start of the quarter.

The Omicron variant during the pandemic helped to increase wage expenses, and over US$400 million was spent on Covid-19 paid leaves.

Nevertheless, Walmart made approximately US$3.5 billion in profit for the quarter. 

Walmart operated at high inventory levels to mitigate supply-chain problems.

Sam’s Club contributed about thirteen percent (13%) of financial year 2022 (FY 2022) sales and is expected to continue its sales growth.



In 2018, Walmart signed an agreement to be the largest shareholder in the Flipkart Group to assist in creating innovations that will expand commerce in India.

Part of the agreement was Walmart paying about $16 billion for approximately seventy-seven percent (77%) of Flipkart.

Other owners of Flipkart are Tiger Global Management LLC, Binny Bansal, Tencent Holdings Limited, and Microsoft Corporation.

By May 9, 2018, Walmart India had twenty-one (21) Best price cash-and-carry stores and one (1) fulfillment center.

Walmart operates in nineteen (19) cities in nine (9) states in India and sources about ninety-five percent (95%) of its products from India.

By July 23, 2020, Flipkart had acquired one hundred percent (100%) of Walmart Private Limited.

Flipkart also launched Flipkart Wholesale, which is a digital marketplace.

Additionally, Flipkart announced a $1.2 billion equity round, which valued Flipkart Group at approximately $24 billion.

Flipkart was founded in 2007 by Binny Bansal and has contributed to India’s e-commerce growth.

By December 15, 2021, Walmart had done well in being recognized with local brands such as Jumbo Cash and Carry in South Africa and Superama and Bodega Aurrera in Mexico.

In 2021, Walmart de Mexico (Walmart Mexico) operated Sam’s Club, Bodega Aurrera discount stores, Walmart Express, and Superama supermarkets.

Walmart has also sold its operations in Argentina, Japan, the United Kingdom (U.K.), and Brazil to concentrate more on its growth markets – Mexico, Canada, India, and China.  




Walmart is making efforts to have profits and revenue from other sources such as:




Through Walmart Connect, Walmart is bringing customers and advertisers together.

Walmart Connect allows providers of products to reach customers primarily through advertisements being in search results and on browse pages.

In the financial year 2021 (FY 2021), net sales from advertising were approximately US$1.6 billion.



Fintech Startup

Walmart has partnered with Ribbit Capital to offer digital financial products.

Ribbit Capital is known for investing in the Robinhood trading platform, Credit Karma, and Affirm.

Walmart already offers Walmart Credit and Walmart Money Card.

Walmart continues to provide financial services such as installment financing, money transfers, and cheque cashing.



Walmart Health

Walmart Health was launched in 2019.

Walmart Health was created to provide primary and urgent care, lab works, x-rays, diagnostics, dental care, optometry, etc.

In 2021, Walmart Health acquired MeMD, a telehealth provider that offers virtual services such as urgent and primary care.



Delivery Services

Walmart is expanding the use of its delivery services to not only bring its products to customers faster and in a more convenient way but also to help other entities reach their clients.

Walmart InHome provides delivery services to its customers, while Walmart Global does delivery services for other companies.

Drones are used for small deliveries, and autonomous vehicles are used for short transport between Walmart stores.



Walmart Plus

Walmart Plus is Walmart’s membership program designed to compete with Amazon Prime and Best Buy TotalTech.

Walmart Plus is for frequent buyers and offers in-store and online benefits such as discounts for fuel at gas stations, unlimited deliveries, and preferential access to deals such as Christmas deals.

Some of the other benefits are free access to Paramount Plus, Lyft credit, and Rx for Less.

Rx for Less offers customers discounts on medications, etc.




During times of inflation, people naturally seek lower prices. Therefore, with Walmart already branding itself as a “low price leader,” it naturally attracts more customers wanting lower prices.

Thus, it is no surprise that middle-income and wealthy families have become more price sensitive during inflation and are willing to join low-income families in shopping more at lower-priced retailers like Walmart.

Walmart has relatively low prices because it can use its size and purchasing power to get lower prices from its suppliers and manufacturers.

Walmart Inc. is determined to increase its online sales by third parties, as Walmart has realized it is more profitable than having its own direct sales.

In the financial year 2021 (FY 2021), Walmart spent about US$145 billion on products from suppliers such as farmers and manufacturers from places like the U.S., Canada, Central America, the Caribbean, India, and Mexico.

As Walmart continues to attract popular manufacturers such as Proctor and Gamble and PepsiCo, it is poised to continue to be the retailer of choice to purchase these and other products.

Being a budget or lower-price retailer is helping Walmart maintain its competitive advantage regardless of a declining economy, recession, or financial crisis.

For example, during the 2008 Global Financial Crisis (GFC) or the Great Recession, Walmart had free cash flow (FCF), good profit margins, and growing revenue.

Free cash flow (FCF) is cash that is left over after operating expenses and capital expenditures like equipment and property are subtracted.

The 2008 Global Financial Crisis (GFC), or the Great Recession, was caused by the subprime mortgage problems that affected many countries.




Walmart trades on the New York Stock Exchange (NYSE) as WMT.

Its stock price closed at US$141.79 on December 30, 2022, and US$143.60 on January 3, 2023.

On January 3, 2023, Walmart Inc’s market cap was approximately US$382 billion, PE ratio (TTM) was about 43.91, gross margin was around 25%, EPS (TTM) was about US$3.25, and forward dividend and yield were 2.24 (1.58%).

The market cap or market capitalization is the total value of all the company’s shares of stocks.

PE ratio is the price-to-earnings that helps to know if the company is overvalued or undervalued compared to how much it earns.

Walmart Inc may be considered overvalued because its PE ratio (TTM) is 43.91.

Gross margin is the amount of money left after all the direct costs associated with producing or buying the company's goods or services are subtracted.

EPS is Earnings per share that is used to show how much money the company makes for each share of stock. So, the higher the EPS, the more profitable the company seems.

Forward dividend yield is the percentage (%) of the company’s current stock price that is anticipated to be paid out as dividends, usually over 12 months.

By Tuesday, January 3, 2023, Walmart had an average brokerage recommendation (ABR) of 1.69.

The ABR is calculated based on recommendations by 27 brokerage firms on a scale of 1 to 5, i.e., strong buy to strong sell.

Therefore, Walmart’s ABR of 1.69 is between strong buy and buy.

Zacks Rank for Walmart is #3, which is hold.

Zacks Consensus for Walmart Inc. is $6.08.

Zacks Rank is based on earnings estimate revisions, while Zacks consensus is the average of estimates by brokerage analysts.

The past 5 years annual earnings growth was approximately 8 %, while the industry was about 13%, and the market was around 15%.

However, in the last 1 year, earnings growth was about 11% for Walmart, approximately 14% for the industry, and about 9% for the market.

By September 13, 2022, analysts had raised Walmart’s valuation from US$139 per share to US$138 per share.

In the third quarter (Q3) of the financial year 2023 (FY 2023), Walmart’s e-commerce sales grew by about sixteen percent (16%) year over year, and its global advertisement business increased by approximately thirty percent (30%).

Walmart has over 265 million customers and about 2 million associates worldwide.

Also, Walmart has approximately 11,400 stores in 26 countries.

Take advantage of opportunities to have more.

It doesn’t matter if you are rich or just getting by.

 We believe you can have more!

So have more at Stocks and Rich by clicking HERE.