With Wall Street seemingly focused only on artificial intelligence and GLP-1 weight-loss drug stocks lately, it might surprise some of these investors to learn that Walmart(NYSE: WMT) was actually a solid growth stock in 2024. A look at its total return performance would show that it blew past the S&P 500 as well as many other popular growth stocks.
Retail stocks in general are seeing improvement as inflation moderates, and 2025 could be another great year for Walmart, the largest retailer in the world. Here are three reasons why investors might want to consider buying it this year.
1. Consumers are spending again
As inflation rates return to more normal levels and interest rates continue falling, consumer spending could start to pick up. Walmart has multiple avenues for being on the receiving end of a big chunk of that. One avenue is simply that it's the largest retailer in the U.S. by sales, and naturally, people shop in its stores. It has more than 4,600 stores in the country and nearly $674 billion in trailing 12-month sales.
Another reason Walmart will benefit from increased consumer spending is that it's a discount retailer targeting a mass audience. This is the population that has been most affected by elevated inflation, and as it eases, they can go back to spending more. If higher inflation persists, these customers will spend their dollars more carefully at discount retailers like Walmart.
Interest rates only started to fall in September 2024, so the full effect has not yet been felt. The Federal Reserve made three prime lending rate cuts in 2024 but, in its most recent meeting, the Fed gave indications that it might not need to make further cuts in the near future. But if it does, that could be even more favorable for Walmart's business.
2. Walmart is gaining in e-commerce
Walmart manages the No. 2 spot in the U.S. for e-commerce, but that may sound better than the reality. Walmart accounts for around 6% of U.S. e-commerce sales, a fraction of Amazon's (NASDAQ: AMZN) market share of around 38%.
Walmart's e-commerce business has been growing though, and it was responsible for much of the company's excellent third-quarter performance. While overall sales increased by 5.5% year over year in fiscal 2025's Q3 (ended Oct. 31, 2024), U.S. e-commerce sales increased by 22%. What Walmart has as an advantage over any other U.S. retailer is its unrivaled store count that it's been using as delivery hubs. This is also an edge over Amazon, which maintains far fewer distribution centers.
Amazon is working to restructure its U.S. logistics network, first switching from a national to a regional network specifically to compete with faster delivery. Now, it's working on its inbound network to get products to its regional fulfillment centers faster. Walmart already has such a network in place. Another edge Walmart has versus Amazon with this model is that it offers in-store pickup.
E-commerce plays other roles in creating new opportunities for Walmart. It offers greater merchandise variation on the digital platform, including more expensive items than it features in many of its stores. This provides it with exposure to a more affluent clientele that doesn't frequent its physical locations. That's another market that Walmart hasn't served in a big way in the past, but that can promote higher sales.
Whether or not higher inflation persists, e-commerce can add more sales to the whole in 2025.
3. Don't forget Walmart's dividend
Walmart pays a growing dividend that adds value for any kind of investor. Because dividend yield and price move conversely, Walmart's dividend currently yields a low 0.9%. Historically, it's usually been around 1.5%.
Dividend stocks are an important component of any portfolio because they're usually steady under pressure. Even if the stock price should falter, strong companies will work hard to maintain (and continue to raise) their dividend payouts. So whatever happens to Walmart stock this year, the dividend should come through. Investors should also note that even during the pandemic, when some companies did suspend their dividends, Walmart didn't.
Like any great stock, investors should buy Walmart for its long-term opportunities and stability, not just for what it could do in 2025. It could beat the S&P 500 again this year, but its greater value lies in its long-term strength as a retail giant.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Walmart. The Motley Fool has a disclosure policy.
