Competitors Blinded by the Light of Tech Investments from John Deere & Wal-Mart

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Wal-Mart & John Deere Taking Over in 2023?

I follow the latest trends in industrials and global commodities every day like clockwork. The two companies that stand out to me are Wal-Mart and John Deere. Read some of the latest reports about their earnings and expectations going into 2023.

I admit that I grew up in Arkansas (not living there now) so I’m quite biased toward these two companies. Wal-Mart’s founder Sam Walton grew up in Arkansas and launched the world’s retail empire out of small-town Bentonville, where the coroporation’s HQ is located to this day.

John Deere, on the other hand, has always had a massive impact on farming communities throughout the United States, and Arkansas holds the position of the largest rice industry in North America, as well as other significant agricultural sectors that are critical for the Natural State’s economy. Owning a John Deere tractor in Arkansas is like a dream come true for most independent farmers in Arkansas, in my opinion.

Now let’s take a closer look at these two companies.

John Deere To Become Industrial Bellweather

First, John Deere and the industrials, because it has been reported by Seeking Alpha as the company to lead in all industrial stocks going into 2023. The outlook is based on stronger farm equipment sales, higher grains prices and thus overall better profits for the equipment manufacturer and retailer.

At present, John Deere’s stock price (DE) stands at $440.75.

At the opening of the week (18/11/222) DE’s stock was at approximately $412 until it surged from $416.70 to $446.70 (22/11/22–23/11/22). The stock price continued to hover around $440 until the week’s closing trading price on Thansgiving (25/11/22). Where the stock’s going next is anyone’s guess.

According to a report by Reuters, part of John Deere’s success will be in overcoming supply chain constraints that have had an impact on the company’s business as a result of ongoing parts shortages for farm and construction equipment since the outbreak of Covid-19.

Regarded as an agricultural and industrial bellweather, it was reported that John Deere has outpaced its rival in the construction and farm equipment sector — Caterpillar — to become largest farm and heavy construction equipment company by market capitalization.

There’s also a strong link between equipment manufacturing and global commodity prices. In the case of John Deere, grain and fertilizer price volatility are crucial to their bottom lines.

After Russia’s invastion of Ukraine on February 24, 2022, senior VP of the Association of Equipment Manufacturers (AEM), Curt Blades, told reporters at DTN/Progessive Farmer:

“Strength in the commodities markets is continuing to drive a lot of the sales growth, which we see in that continued growth in bigger row-crop units. And with fuel prices seeming to be on their way up for the foreseeable future, it’s possible even more farmers will want to get in on the efficiencies that new equipment has to offer.”

Mark Stock, CEO of used farm and construction equipment auction platform, Big Iron Auctions, asserted that the demand for used machinery skyrocketed soon after the Russia-Ukraine conflict. He shared some insights about the data gathered from the online auction platform, noting that a 2012 model-John Deere 9460R, increased in value to $176,000.

However, I’d point out that one aspect that shouldn’t be overlooked is about how much the company has evolved since the arrival of CEO John May on 4 November 2019. For instance, on 26 Feburary 2020, John May pointed out that the company was most interested in exanding on three key points: innovation and ag-precision technologies, raising earnings forecasts to unprecendented levels and making acquistions to increase scale (i.e. John Deere acquired Wirtgen Group to grow on its construction and forestry business). Read more about John May’s background here.

The company has not taken its techonological ambitions lightly. John Deere published a strategic plan to shareholders in Feburary 2022 which included announcements to increase product autonomy, connectivity and sustainability to build on the company’s reputation as a global leader in the farming and construction sectors. To this point, CEO John May was selected to be the first keynote speaker for the Consumer Technology Association (CTA 2023) in 2023. In response, the CEO said:

“The opportunity for technology and sustainability to positively impact the world is most present in agriculture, where farmers continue to be challenged to feed our growing population. John Deere is focused on developing technology with a purpose, to make our customers more efficient and sustainable. The work they do affects every single person and we’re honored to have the opportunity to help tell their story on the mainstage.”

Matt Arnold of Edward Jones is considered to be one of the leading voices on the trajectory of John Deere’s stock price and earnings outlook. You can read one of his latst stock reports about the company here.

Notably, Arnold told reporters at the Chicago Business Journal that global demand for John Deere’s products should benefit from three factors affecting global markets — higher grain prices, economy recovery and infrastructure investments. Since 2022, John Deere has also invested in its fleet of autonomous machinery.

In today’s world it is clear that technological innovation is critical to achieveing success during global volatility in markets. Stock prices and a company’s value will continue to be affected by geopolitical trends as a result of the Russia and China exposure to industrials and commodities.

Wal-Mart To Invest In Tech & Global Footprint

Now let’s take a closer look at Wal-Mart and how the supermarket behemoth intends to compete with a technologically superior competitior in Amazon.

In the aftermath of Black Friday in 2022 CNBC reported that Wal-Mart defeated Amazon to take the top spot among consumers for Black Friday shopping and discounts, including for online searches and purchases — an area where Amazon generally has dominated the retail marketplace.

According to the data, Walmart’s search traffic went up by 386% year-over-year to top Amazon’s previous number one ranking in 2021. It was also reported that as of June 2022 Wal-Mart had 10,585 stores in operation globally with a total of 2.3 million associates worldwide.

Notwithstanding consumer spendings risks due to rising inflation on consumer goods throughout 2022, Wal-Mart has been keen to invest in technological innovation and spread its wings to new global markets such as South Africa.

It was reported on 21 October 2022 that Wal-Mart had plans to purchase a full stake in South Africa’s Massmart to increase its presence in the retail market there. This story traces back to 2011 when Wal-Mart initially bought a stake in the Massmart, which yielded unimpressive results.

But with Amazon increasing it global presence, Wal-Mart sees Massmart as a new opportunity to compete for market share globally. According Wal-Mart International President Judith McKenna:

“We continue to see opportunity in Massmart and the impact the business can have, providing people across the region with greater access to goods and services they want”.

In fact, since assuming the leadership position of Wal-Mart Interational, Judith McKenna has been pushing an internatonal strategy by giving the company’s internatonal porfolio more exposure to e-commerce sales and purchases through omnichannel marketing experiences and local business sales across Africa, Asia, Central America and Europe, including a $1.2 billion investment in China distribution centers, the sale of British supermarket Asda for $8.8 billion and expanding portfolio interests in India’s Flipkart and PhonPe. Forbes

It’s no surprise that she was selected as one of Forbes The World’s Most Powerful Women in 2021.

The real showdown between Wal-Mart and Amazon takes place in the markets for China and India. It has been concluded that the digital transformation has taken the retail consumer by storm in China and India, revealing shopping trends that would take innovation to a whole new level.

For these reasons Wal-Mart has picked up the momentum in its technology investments vis-a-vis Amazon. Wal-Mart purchased a robotics automation company — Alert Innovation — giving the company an edge over Amazon in the space of fulfilling orders and products delivery. After the aqcuisiton, Wal-Mart released this statement:

“Further investing in this technology will enable us to leverage our store footprint — 4,700 stores located within 10 miles of 90% of the U.S. population — for storage and fulfillment. For customers, this means orders can be fulfilled quickly and conveniently through pickup and delivery, giving them the items they want, when and where they want them. This system also enhances the experience for associates, who are integral to helping us perfect the system.”

Even as some of biggest retailers in the United States seek to cut costs going into an uncertain retail environment for 2023, investments in technology and data have continued to rise throughout 2022. In the case of Wal-Mart and Amazon, in particular, competition for markets in India and China are a key battleground to the technology investment landscape.

By increasing exposure to its India businesses, Wal-Mart proposed it would expand its “Made in India” export-driven retail segement with an aim to reach $10 billion by 2027. This includes the global tech team based in India called Element which ecompasses Artifical Intelligence (AI) and Machine-Learning (ML) for the company’s research and development (R&D) investments.

It’s no wonder that this is happening so vigorously. Amazon is supposed to top Wal-Mart to become the largest retailer in the United States by 2024.

Wal-Mart has even went as far as establishing a presence in streaming with a new partnership with Paramount+ in light of the failure of its own streaming platform.

It appears to me that Wal-Mart is competing in the long-game against Amazon. Who would’ve known that the digital transformation would pit these two against each other for global supremacy in the retail marketplace. Though the consumer market in China remains a big question mark for Wal-Mart, I think its newly enchanced positions across Africa, as well as increased portfolio exposure to the Indian market, give the company the biggest advantages going into 2023.

I’ll be publishing The Weekend Brief (TWB) regularly touching on aspects of the global markets (including stock markets) which are at the nexus of tech, industrials and global commodities. Please follow the publication Areas & Producers to read more content about the future of core areas and critical producers of the global economy.

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