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Walmart's Low Price, High Volume Business Model To Face Inflation Challenge

Oct. 05, 2021 1:30 PM ETWalmart Inc. (WMT)17 Comments
Zoltan Ban profile picture
Zoltan Ban


  • Walmart's profit margins have been on an eroding path for some years, even as revenue volumes have been increasing. Merchandise inflation may become a factor that could erase profits altogether.
  • Because Walmart relies more heavily on low-income customers, it will be harder to pass on higher merchandise costs compared with the competition.
  • If inflation will prove to be transitory, Walmart's healthy financial situation will prevent long-term consequences from arising. Global inflationary trends show signs of being sustained, therefore, Walmart could suffer.
  • In a worst-case scenario, Walmart can be faced with a sustained period of growing inflation, with financial losses mounting, which can lead to a quick deterioration of its healthy debt situation.

Physical distancing in Walmart outdoor line-up

Colin Temple/iStock Editorial via Getty Images

Investment thesis: There are growing signs that we are faced with a worldwide surge in inflationary pressures. Clothing prices may rise because of the high cost of cotton we are seeing. Food prices are

Walmart net income as percentage of revenue

Source: Walmart Investor Relations

retail store shopper preferences by income

Source: Business Insider

Hourly private sector earnings in US

Source: Federal Reserve Bank of St. Louis

US yearly inflation rate chart

Source: US inflation calculator

This article was written by

Zoltan Ban profile picture
My name is Zoltan Ban,  I have a BA in economics. I am a personal investor with over a decade and a half of active trading experience.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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