Walmart's groceries make it the king of brick-and-mortar retail
Thomson Reuters
In a note to clients sent out on April 7, Telsey Advisory Group Analyst Joseph Feldman says that Walmart is reemerging as the dominant brick-and-mortar retailer because of the company's investment and execution in grocery and private brand sales.
"Walmart appears to be regaining its dominance in physical retail... The focus on food and e-commerce, price investments, and the customer experience point to a winning formula to gain market share," Feldman wrote.
He upgraded Walmart to "Outperform" and raised his price target to $82.00 from $73.00.
Over the last decade Walmart has invested millions in their grocery department, and it has paid off. Walmart is now the second largest grocery store in the country behind Kroger. Additionally, grocery accounts for roughly 56% of sales at Walmart and 59% at Sam's Club, making grocery the company's largest business.
Feldman highlights some key grocery initiatives:
Freshness: Walmart is adding more and more local farmer produce to their stores to highlight freshness. They are also rearranging food in their stores to show off the new selection.
Natural and Organic: It is clear that there is heavy demand for natural and organic products. More than ever, Walmart shoppers are conscious of what they eat, and Walmart is meeting the demand with a plethora of new natural products, which have better margins.
Private Brands: Walmart is vastly expanding its private brand product offerings and recently opened an innovation center to come up with new ideas and new recipes. Since these products are produced by Walmart, they also have better margins.
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