The Best Retail Stock to Hold in Uncertain Times
Key Points
Walmart's low-cost mindset is deeply ingrained in the company culture.
It passes these savings on to customers in the form of low prices.
- 10 stocks we like better than Walmart ›
While no one knows what the future holds, these seem like particularly unsettled times. After all, there have been ever-changing tariff policies, persistent inflation, and signs of a weakening job market.
Even the Federal Reserve, after cutting short-term interest rates at its October meeting, has stated that it's not certain it may lower rates in December. The lack of economic data due to the federal government shutdown further clouds the picture.
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Amid this uncertainty, stock buyers are looking for safe investment options. Walmart (NYSE: WMT) stands out while other retailers have suffered from softer consumer spending.
Image source: Getty Images.
Low prices draw a crowd
Venerable Walmart opened its first discount store in 1962. It employs a simple but very effective strategy. Management keeps costs down so it can charge customers ultra-low prices. In fact, it's hard to find a competitor with lower prices.
That always appeals to shoppers. But it's particularly attractive during times of economic uncertainty.
You can see this in Walmart's same-store sales (comps) growth. Its fiscal third-quarter comps at its core Walmart U.S. segment increased 4.5%, excluding gas sales.
Importantly, higher traffic contributed 1.8 percentage points, and increased spending accounted for the balance. Management also noted that it gained shoppers across income groups.
The company invests heavily in technology to remain competitive, including offering more efficient delivery. It has spent $18.6 billion on capital expenditures for the first nine months of the year, which includes supply chain improvements, customer-facing initiatives, and technology.
Walmart will have a new CEO next year, but I don't expect the company to miss a beat. John Furner, currently president and CEO of the successful Walmart U.S. division, will take the reins on Feb. 1.
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Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walmart. The Motley Fool has a disclosure policy.
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