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Walmart's Canada Unit Eyes Prospects in Cannabis Products

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Walmart Inc. (WMT - Free Report) , acclaimed for being in the lookout for new business opportunities, seems to have an interest in the evolving marijuana industry. Apparently, this big-box retailer’s Canada unit is exploring business opportunities surrounding cannabis-based products. However, per various sources, the company has no immediate intentions to venture into this arena.

Why Walmart Could be Interested in Marijuana?

Cannabidiol, which is essentially a non-psychoactive chemical compound extracted from the cannabis plant, is stated to have several health benefits and doesn’t cause intoxication. This has been drawing the attention of several retailers, including Walmart that has been closely analyzing the health impacts of such ingredients and the effects of including the same in a range of products.

Experts believe that cannabidiol or CBD infused products will soon make its way in categories such as beverages and beauty, evolving as a booming category in health and wellness. Moreover, with Canada soon to legalize the recreational use of marijuana, quite a few retailers are expected to show interest in this burgeoning space.

If things proceed per plans, Walmart’s Canadian unit will be among the first few major retailers to venture into the CBD-based recreational products arena. Moreover, foraying into this niche category is likely to provide the company with improved competing grounds. We note that the budding interests in cannabis have led to some interesting tie-ups, mostly in beverages. Recently, Constellation Brands invested in Canada’s Canopy Growth Corp (CGC - Free Report) . Molson Coors’ (TAP - Free Report) Canadian unit entered into a joint venture with Hexo Corp for manufacturing cannabis-infused drinks. In fact, Coca-Cola (KO - Free Report) is also eyeing the growth of this market and has plans to make an entry.

 


 

We believe that Walmart’s latest plans to enter the marijuana space, if acted upon, will be accretive to the company’s international business wing. Notably, the company’s international segment performed quite well in the second quarter of fiscal 2019, wherein currency-neutral sales grew 3.1%. During the period, sales grew in Canada, buoyed by the company’s consumer-driven initiatives like lowering prices. Going ahead, the company is committed toward achieving growth across the international markets on product and brand expansions.

Wrapping up, we applaud Walmart’s robust efforts to maintain footing in the ever-evolving retail space. From prudent acquisitions and partnerships to combining shopping with advanced technology, this supermarket giant has been playing several cards to stay competitive. Moreover, this omnichannel retailer’s strategy of entering new business arenas and exploring growth prospects is noteworthy.

That being said, if Walmart’s latest plans to venture into recreational marijuana materializes, it will augment the company’s portfolio and help it stand out in the industry.  

All said, we expect this Zacks Rank #3 (Hold) company to continue coming up with strategies to stay a notch above peers. Notably, Walmart’s shares have gained 12.9% in the past three months compared with the industry’s 10% rise.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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