The Investing Clue Hidden Inside Walmart’s Quarterly Report

By TradeSmith Research Team

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As the largest retailer in the United States by sales in 2021, Walmart Inc. (WMT) has its finger on the pulse of the economy.

It provides a glimpse into spending trends, which is especially useful information as we simultaneously face high inflation, rate hikes, a slowing housing market, and fears of a recession.

From Walmart’s just-released Q3 earnings report, one of those spending trends that caught our attention is in food.

CFO John David Rainey said in a Nov. 15 CNBC report that people are buying less-expensive proteins (beans, hot dogs, and peanut butter) over pricier meats. He also mentioned in a call with investors that people are buying more products from Walmart’s own brands.

Looking back further, CEO Doug McMillan said in 2020 that the company’s sales of private-label goods are growing faster than its overall sales, with Walmart’s Great Value brand generating $27 billion in annual sales.

The Great Value brand includes everything from paper towels and plastic cups to canned goods, coffee, and microwave popcorn.

With a bag of chicken nuggets under $7 (the same size bag from Tyson costs $7.98), eight hamburger buns for $1, and sweet corn for 50 cents a can, the deals and savings offered by the Great Value brand are exactly what people are looking for as they work to make each dollar stretch as far as it can go.


These are also the type of products that people aren’t going to be picky about switching over from brand names for if the price is right and the quality is decent.

After all, if most people can’t tell the difference between Walmart’s brand of 50-cent sweet corn and a can of sweet corn from Del Monte that costs $1.49, it makes sense to go the cheaper route.

The growing appeal of private labels is backed up by numbers… and not just the ones on Walmart’s quarterly earnings report.

In 2021, private brand sales set a record of $199 billion.

In June 2022, a Food Industry Association survey found that 41% of shoppers are buying more private brands than they were before the pandemic.

That offers us an investing clue.

One way to invest in the growing popularity of private brands would be Walmart, but everyone has heard of Walmart.

TradeSmith can go a step further and find companies that most people have never heard of, run them through our Health Indicator, and share an investable opportunity that is hidden to most people.

That way, you have a chance to know about an under-the-radar company early and, if you so choose, act before the crowd finds out about it.

One of those companies is TreeHouse Foods Inc. (THS).

TreeHouse Quick Facts

CEO: Steven Oakland – previously served as the Vice Chair and President of U.S. Food and Beverage at J.M. Smucker Co. (SJM)

Market Cap: $2.6 billion

YTD Return: 10.50%

The business is straightforward: TreeHouse Foods provides everything from pretzels to cookies to in-store bakery items for grocery stores and food service companies.

Source: TreeHouse Foods Q3 2022 Presentation

As was shared earlier with the price differences between cans of corn, the price savings for private brands over national brands starts to add up.

And from a slide in TreeHouse’s most recent investor presentation, it’s easy to see just how significant those overall savings can be in an environment where people are trying to stretch each dollar as far as it can go.

As of this writing, the THS stock price is up 10.50%, while the S&P 500 is down 17.28%.

That shows the kind of resilience this company has had over the last year, and with inflation still high and the long-term trend of more folks buying private brands, there’s a lot for forward-thinking investors to like about this company.

THS is in our Green Zone, is considered to have medium risk with a Volatility Quotient (VQ) of 27.97%, and is owned by Ray Dalio, according to our Billionaires Club.