Aug 14, 2020
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About this Deal
The coronavirus outbreak and the resultant social distancing have taken online shopping to the next level. Americans are now spending more time at home, preferring to shop online and opting for delivery at their doors or curbside pickup options. Certainly, this calls for retailers to sharpen their delivery game, an area where Walmart Inc. WMT has been focusing on for a long time now. The world’s largest retailer took yet another step forward in this realm with its latest alliance with Instacart, as reported by various media reports.
Sources revealed that Walmart is teaming up with Instacart for same-day deliveries in some U.S. markets. The deal is currently in its pilot phase, with deliveries available in Los Angeles, San Francisco and San Diego in California and Tulsa in Oklahoma. Thanks to the Instacart deal, customers can easily have a range of Walmart’s products, such as groceries, pantry staples, home décor, alcohol, personal care, electronics and more delivered at their door.
Without a doubt, this adds another feather to Walmart’s cap in its game against Amazon AMZN, especially at a juncture where the demand for grocery delivery is seeing a spike. In fact, with the continued rise in the number of COVID-19 cases, such trends are likely to stay. Given such a scenario, Walmart’s efforts to step up the delivery game are likely to work well and help it stay firm amid the competitive frenzy.
Well, Instacart was already a partner with Walmart’s Sam’s Club division. Apart from this, this provider of grocery delivery and pickup service is delivering products for other retail behemoths like Target TGT and Kroger KR, to name a few. Coming back to Walmart, the company has been undertaking aggressive efforts to boost its business and cater well to customers amid the crisis situation.
To this end, Walmart unveiled Express Delivery during the first quarter of fiscal 2021, through which many items from its stores can be delivered to customers in less than two hours. Also, Walmart's Sam’s Club division recently launched a curbside pickup service, which offers contact-less order online and deliver to car service. Further, the company expanded its ship-from-store option temporarily to about 2,500 stores and extended curbside pharmacy pickup as well as mail-to-home options in the United States. Apart from this, the company announced a partnership between Uber and Flipkart for the delivery of daily essentials. Walmart has ensured proper sanitization, launched pickup in China, expanded online grocery capacity in the U.K. and introduced contact-less delivery in Canada, among others.
While these raise optimism, high COVID-19 costs, such as escalated wages and benefits to employees, costs associated with sanitization and other safety measures, are concerning for this Zacks Rank #4 (Sell) company’s margins. Incidentally, the company has been paying special cash bonuses to some of its workers. Apart from this, price investments and shift in sales mix to lower-margin channels and categories pose threats to the gross margin. Nonetheless, we believe that the supermarket giant’s robust sales-driving efforts are likely to offer cushion.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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