Walmart Inc. (WMT Quick QuoteWMT - Free Report) has been acing it for upping delivery services and enhancing customers’ experiences. The omnichannel retailer, which has been working on delivery through drones for a while now, unveiled that it would be extending its DroneUp delivery network to 34 sites by the end of the year. This will give the company scope to reach four million U.S. households in six states, including Arizona, Arkansas, Florida, Texas, Utah and Virginia.

Customers can order from thousands of eligible products from 8 am to 8 pm for delivery through drones within 30 minutes. The weight of the ordered product can go up to 10 pounds for a fee of $3.99 per delivery. This will give Walmart the ability to deliver more than one million packages through drones in a year. WMT already tested delivery through DroneUp and the latter has been a reliable partner. This expansion is likely to help Walmart scale up its business even further.

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Walmart Continues to Up Delivery Game

Walmart has taken robust strides to strengthen its delivery arm as evident from its expansion of the InHome delivery service, investments in DroneUp, a pilot with HomeValet, the introduction of Carrier Pickup by FedEx, the launch of the Walmart+ membership program, drone delivery pilots in the United States with Flytrex and Zipline and a pilot with Cruise to test grocery delivery through self-driven all-electric cars. Walmart had also unveiled an alliance with DoorDash in the third quarter of fiscal 2021 to deliver prescriptions from pharmacies of Sam’s Club alongside expanding Scan & Go to all fuel stations at U.S. Sam’s Clubs.

Before this, Walmart unveiled Express Delivery and joined forces with Point Pickup, Roadie and Postmates alongside acquiring Parcel to enhance its delivery service. Furthermore, the company’s store and curbside pickup options add to customers’ convenience. As of the first quarter of fiscal 2023, Walmart U.S. had 4,600 pickup locations and more than 3,600 same-day delivery stores.

Robust delivery services have been a key driver for the company’s e-commerce sales. Walmart’s e-commerce business and omni-channel penetration have been increasing, all the more amid pandemic-led social distancing. From the fiscal 2021 beginning to the fiscal 2022 end, the company’s digital sales as a percentage of sales increased from 6% to 13%. The company has been taking several e-commerce initiatives, including buyouts, alliances and improved delivery and payment systems.

The company is innovating the supply chain and adding capacity as well as building businesses, such as Walmart GoLocal, Walmart Connect, Walmart Luminate, Walmart+, Spark Delivery, Marketplace and Walmart Fulfillment Services. U.S. e-commerce sales rose 1% in the first quarter and soared 38% on a two-year stack basis. The company is witnessing rapid growth in advertising income. At Sam’s Club, e-commerce sales jumped 22% due to a robust direct-to-home show and solid curbside performance. In the International segment, e-commerce sales advanced by 22% on a constant-currency basis.

Walmart’s other notable strides include the acquisition of Zeekit, which is focused on uniting fashion and technology via its virtual fitting room platform. Apart from this, the company’s investment in Ninjacart, contracts with Symbotic, Goldman Sachs, Shopify, Green Dot and Microsoft and the buyouts of ShoeBuy, Moosejaw and Bonobos, among others, underscore its digital efforts. The buyout of a major stake in Flipkart has been bolstering its International segment. Additionally, WMT is making aggressive efforts to expand in the booming online grocery space, which has long been a major contributor to e-commerce sales.

Wrapping Up

This Zacks Rank #5 (Strong Sell) company has been battling supply-chain bottlenecks and escalated costs and persistently elevated inflation. The company’s U.S. segment operating income was hurt by high wage costs, an adverse mix due to the lower percentage of general merchandise and fuel costs and supply-chain woes in the first quarter of fiscal 2023. Some of these cost headwinds are likely to persist, which is reflected in management’s lowered guidance for the operating income and earnings per share (EPS). Shares of the company have declined 7.4% in the past three months compared with the industry’s drop of 7%.

However, Walmart’s efforts to strengthen stores and e-commerce performance, like the abovementioned extension of DroneUp, are likely to keep it well-placed for growth. 

3 Retail Stocks to Bet on

Here are three better-ranked stocks – Dillard's, Inc. (DDS Quick QuoteDDS - Free Report) , The Kroger Co. (KR Quick QuoteKR - Free Report) and Abercrombie & Fitch Co. (ANF Quick QuoteANF - Free Report) .

Dillard's, which operates retail department stores, sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 224.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Dillard's current financial-year sales suggests growth of 6.1% from the year-ago period. DDS has an expected EPS growth rate of 14.6% for three to five years.

Kroger, a renowned supermarket company, carries a Zacks Rank #2 (Buy). The company has an expected EPS growth rate of 9.9% for three to five years.

The Zacks Consensus Estimate for Kroger’s current financial-year sales suggests growth of 3.2% from the year-ago period. KR has a trailing four-quarter earnings surprise of 22.1%, on average.

Abercrombie & Fitch, a specialty retailer, holds a Zacks Rank #2. Abercrombie & Fitch has a trailing four-quarter earnings surprise of 103.5%, on average.

The Zacks Consensus Estimate for ANF’s current financial-year sales suggests growth of 3.7% from the year-ago period.