- Walmart has faced many challenges over the past year due to inflation and supply chain issues.
- Analysts expect the retailer to resolve excess inventory in 2023, but hurdles could arise.
- As the new year dawns, analysts are keeping a close eye on two of Walmart’s ambitions: healthcare and banking.
Large amounts of unwanted inventory clogged store aisles. Ambitious e-commerce efforts have failed. A health care push faced a major setback.
Walmart has certainly seen tribulations in 2022 in the face of runaway inflation and supply chain issues. And in 2023, customers should brace themselves as the retailer tries to capitalize on e-commerce, healthcare and banking plans, among others, while facing another potentially unpredictable year, analysts say.
“They’re definitely not putting all their eggs in one basket,” said Mari Shor, research analyst at Columbia Threadneedle Investments.
Here are four major Walmart challenges to watch in 2023.
1. Try to “step into the new year cleanly” without excess inventory
Excess stock from Walmart blocking a private nursing room in an Indiana store.
Anonymous
Access inventory was Walmart’s boogie man of 2022.
Supply chain issues and inflation led to the retailer having far more supplies than consumers were buying – leading to inaccessible back rooms packed with full pallets.
Walmart has said since May that it would make a concerted effort to eliminate excess inventory and, to its credit, it has kept its word. On its first-quarter earnings call in May, the company reported a 32% year-over-year increase in inventory; in the last earnings call in November, that increase was just 13%.
“I feel good about them being able to get into the new year properly,” Shore said.
The warning : On the other hand, Walmart’s worst-case scenario for 2023 is for any of the unpredictable issues of 2022 to reoccur, such as supply chain disruptions or changes in consumer behavior caused by a potential recession, according to Michael Rofman, a Mazars partner: “They could be in a period where they have, again, too much inventory.”
2. Continue to grow e-commerce savings while mitigating costs
Someone looking to buy something on walmart.com.
Rafael Henrique/SOPA Images/LightRocket via Getty Images
Walmart struck gold with its online sales at the start of the pandemic, as it experienced as many as 97% year-over-year growth in the second quarter of 2020.
But despite great efforts – ranging from pushing the Walmart + membership platform to offer first online sales of Black Friday – the retailer has not found that same magic this year.
Walmart saw a 8% drop in the average number of daily visits to its website this year to November compared to last year, according to data from Similarweb, a web analytics company.
The best-case scenario for Walmart with its e-commerce plans in 2023 is to have “continued measured growth” in home delivery and curbside pickup sales, according to Zain Akbari, equity analyst for Morningstar.
The warning : But according to Shor, the worst-case scenario for Walmart in 2023 would be if the retailer struggles to roll out cost-cutting initiatives, like its planned automated fulfillment centers, and e-commerce growth continues to decline.
3. Expanding clinic presence is a “must” to create major healthcare gains
A Walmart Health clinic.
Courtesy of Walmart
Health remains one of the most lucrative fields Walmart was barely touched nowadays. The retail giant currently has just 32 clinics in five states.
In 2022, Walmart saw competitors like this Amazon makes a splash in healthcare. 2023 is going to be an uphill battle for Walmart, as Dr. Cheryl Pegus, Walmart’s executive vice president for health and wellness, left the company in November for a healthcare company at JPMorgan.
Walmart “needs to expand its clinical presence and address the operational challenges that many of its clinics have faced,” said Sari Kaganoff, managing director of consulting at Rock Health Advisory.
Part of the expansion has been announced for 2023, such as Walmart Plans to launch 16 more clinics in Florida by the end of the year.
The warning : On the other hand, Walmart Healthcare’s worst case scenario for 2023 would be a scandal stemming from either a data breach or patient abuse, according to Natalie Schibell, director of research at Forrester: “A glaring case medical malpractice or a major data breach.” would cripple Walmart’s goals.
4. Deploy new banking services to customers
A Walmart logo is seen in one of the stores in Monterrey.
Thomson Reuters
Of all of Walmart’s big moves for 2023, its foray into banking is perhaps the most secretive.
After Walmart-backed fintech Hazel has acquired neobank One and adopted his name earlier this year, the company has He worked quietly to recruit top talent of Goldman Sachs and Apple to develop financial services.
Although current and former One customers have experienced issues with the bank, Walmart has advanced in trying to register employees for a bank account. And its work has only just begun: the group It reportedly plans to offer buy-it-now and pay-later services to Walmart customers from next year.
The warning : According to Akbari, One “has a lot of upside” in 2023 and Walmart should focus on helping build the infrastructure for that: “They tend to just focus on making sure things are as close as possible and then move forward rather than trying to be too experimental with how they approach things.”
Got a Walmart tip? Ben Tobin can be reached by email at btobin@insider.com or via the encrypted Signal app or text at (703) 498-9171.
0 Comments