With Covid-19 still raging, people are consolidating their shopping trips to reduce their risk of exposure, a habit that could be valuable to the biggest retailers if it sticks post-pandemic. And if shoppers are buying jeans with their groceries, the next step could be getting their health care with their soap and toothpaste.
(WMT) announced earlier this week that it is launching Walmart Insurance Services, which will sell Medicare insurance plans, in time for annual enrollment. Cowen & Co. analyst Oliver Chen writes that he is upbeat about the move, which is just the latest in a string of “actions taken by management to create a one-stop-shop for health care services.”
While it may not seem aligned with the company’s core business at first, Chen believes that ultimately, Walmart will be able to merge aspects of retail, like grocery shopping, with addressing consumers’ needs in health-related areas such as dietary restrictions and conditions like diabetes. This would create a more personalized experience for shoppers—a factor that has been shown to drive loyalty over time in the retail world.
Walmart, of course, already has a footprint in the health care space, including its partnership with insurer Humana (HUM), thousands of in-store pharmacies, and a handful of clinics. Chen believes the number of clinics will rapidly expand following the announcement.
Those health-care ties, he says, make the latest initiative seem like a natural evolution of the company’s long-term goals.
“We acknowledge scaling Walmart Insurance Services and other various health care initiatives will take time, but once scaled we anticipate management will look to integrate some into its recently launched Walmart+ membership program,” he writes. “We believe these health care services would distinguish Walmart from competitors.”
He reiterated an Outperform rating and $155 price target on the stock. Shares were up just 0.1% to $140.75 in morning trading. Still, the stock has jumped more than 18% in 2020, helped by moves like Walmart’s push into the subscription-service and social-media worlds, which demonstrate how the company has been moving beyond its core retail business to develop future lines of growth.
Write to Teresa Rivas at [email protected]