How A.I. Could Boost These 3 Top Consumer Stocks

January 30, 2024
By The Investing Insider Staff

Key Takeaways:

  • Walmart (Ticker: WMT) is utilizing AI innovations like personalized search, voice shopping, and robots to enhance the retail experience and boost eCommerce sales.

  • Ulta Beauty (Ticker: ULTA) has pioneered AI apps for virtual try-on, shade matching, and advisors to reinvent beauty retail, though it faces profitability challenges.

  • Mondelez (Ticker: MDLZ) leverages AI to expand creativity in R&D and marketing like highly personalized ads, driving double-digit revenue and EPS growth.

In the ever-evolving landscape of technological innovation, Artificial Intelligence (AI) has emerged as a transformative force, redefining the way businesses operate and engage with their customers.

The consumer sector, a broad and dynamic arena, stands at the cusp of this revolution, harnessing AI to revolutionize everything from product development to customer service.

The integration of AI in the consumer sector is not just about automation or efficiency.  It's about creating new value propositions and enhancing customer experiences in ways previously unimaginable. AI's ability to analyze vast amounts of data, predict consumer trends, personalize customer interactions, and optimize supply chains is proving to be a game-changer.

Companies that are quick to adopt and innovate with AI technologies may be poised to outperform their peers, making them attractive prospects for investors.

Today, we’ll illuminate the strides being made by three notable consumer stocks – Walmart (ticker: WMT), Ulta Beauty (ticker: ULTA), and Mondelez International (ticker: MDLZ) – in integrating AI into their business models.

By examining how these companies are leveraging AI, we can gain insights into the potential growth and investment opportunities that AI advancements are unlocking in the consumer industry.




Top AI Consumer Stock #1: Walmart (Ticker: WMT)

Walmart is a top AI consumer stock

Walmart's AI-Powered Retail Innovation:

Walmart, a renowned retail giant, is significantly leveraging AI advancements to revolutionize the shopping experience for its customers. They are implementing several cutting-edge AI technologies to make shopping more intuitive, efficient, and customer-centric:

  1. The company is utilizing AI to provide concise summaries of product reviews and highlight important features, aiding customers in making informed purchasing decisions. This application of AI ensures customers spend less time scrolling and more time enjoying a streamlined shopping experience.
  1. Walmart is experimenting with tools that combine General AI and Augmented Reality to offer design assistance, taking the shopping experience to the next level. These tools have already shown success in apparel and home goods categories, leading to increased customer satisfaction and sales.
  1. Building on its Text to Shop feature, Walmart is testing a voice shopping experience within its mobile app. This hands-free shopping option could include features like voice commands for shopping on Walmart.com, conversation-based interactions with the assistant, and scheduling pickup and delivery slots.
  1. In addition to customer-facing AI applications, Walmart has launched tools like “My Assistant” to assist its non-store associates. This tool helps in tasks such as summarizing documents and creating new content, demonstrating Walmart’s commitment to enhancing productivity through AI.
  1. Walmart has introduced a new generative AI-powered search function across its iOS, Android, and web platforms. This feature enhances the online shopping experience by understanding the context of customer queries, thus offering personalized and relevant product suggestions. For instance, a simple query like “Help me plan a unicorn-themed party for my daughter” generates a comprehensive list of related products, streamlining the shopping process.
Walmart's voice AI


Why We Think Walmart is a Top AI Consumer Stock to Buy:

Walmart Inc's financial results for the third quarter of fiscal year 2024 demonstrated strong performance with notable growth and increased guidance.

The company reported a 5.2% increase in revenue, reaching $160.8 billion. This growth was bolstered by a 4.9% rise in Walmart U.S. comparable sales. Adjusted earnings per share (EPS) climbed to $1.53, leading the company to raise its full-year sales and EPS outlook.

The quarter also saw significant achievements in the eCommerce sector, with global sales surging by 15% and U.S. eCommerce up by 24%. Operating cash flow grew impressively to $19.0 billion, marking a $3.3 billion increase from the previous year. Walmart's financial health was further evidenced by an improved consolidated gross margin rate, which increased by 32 basis points, and a reduction in operating expenses as a percentage of net sales by 1.82 percent.

These results show Walmart's operational efficiency and its adeptness in adapting to changing market dynamics, particularly through leveraging AI and digital innovations. The company's robust revenue growth across various segments, coupled with its optimistic outlook for the remainder of the fiscal year, reflects its confidence in sustained success and ongoing commitment to delivering value to customers and shareholders.




Top AI Consumer Stock #2: Ulta Beauty (Ticker: ULTA)

Ulta Beauty is a top AI consumer stock

Ulta Beauty: Reinventing Beauty Retail with AI:

Ulta Beauty has embraced AI as a core driver of its digital transformation and customer experience enhancement. The company has been a pioneer in implementing AI tools, significantly investing in personalization and advanced digital experiences:

  1. Ulta Beauty's foray into AI began with the acquisition of QM Scientific in 2019, focusing on personalizing the shopping experience for its customers. This move was a part of Ulta's broader strategy to prioritize AI capabilities in its operations.
  1. The establishment of Prisma Ventures, Ulta's digital innovation fund, reflects the company's commitment to integrating new technologies. This $20 million fund aims to invest in emerging technology startups, fueling further advancements in AI and digital experiences.
  1. Innovative applications like Luum, a robot powered by AI for lash applications, and 10Beauty, a full manicure robot, showcase Ulta's pioneering role in bringing AI into beauty services.
  1. With investments in companies like MIRI.health, Ulta is exploring AI's role in wellness, indicating a potential expansion of its AI integration beyond beauty to health and wellness sectors.
  1. Ulta Beauty has launched several AI-powered initiatives, including the GLAMlab Virtual Try-On, Foundation Shade Finder, and an AI-Powered Beauty Advisor. These tools use AI and augmented reality (AR) to enhance the customer shopping experience, from virtual product trials to personalized skincare recommendations.
Ulta Beauty AI in action


Why We Think Ulta Beauty is a Top AI Consumer Stock to Buy:

In Q3 2023, Ulta Beauty reported a 6.4% increase in revenue, reaching $2.49 billion.

This growth was primarily driven by higher comparable sales and strong performances from new stores. The company also experienced a notable rise in gross profit, increasing from $962.8 million in Q3 2022 to $992.1 million in Q3 2023.

Despite these positive developments, net income saw a 9.1% decline to $249.5 million, and the profit margin reduced to 10%, impacted by increased expenses, including marketing and interest costs associated with new technology investments.

Earnings per share (EPS) stood at $5.07, surpassing analyst expectations but still lower than the $5.34 reported in the same quarter of the previous year. Following these results, Ulta Beauty’s stock saw a 14% increase, indicating strong investor confidence in the company's growth trajectory and market positioning, despite the challenges in profitability.




Top AI Consumer Stock #3: Mondelez International (Ticker: MDLZ)

MNDZ is a top AI consumer stock

Mondelez International's AI Revolution: Enhancing Creativity and Efficiency

You might not recognize the name, but Mondelez International is the company behind some of your favorite brands including Ritz, Cadbury and Chips Ahoy. Mondelez is significantly innovating and enhancing its product development, marketing, and R&D processes by harnessing the power of AI.

The company's multifaceted approach in R&D focuses on breaking conventional constraints and augmenting human creativity. In addition to its efforts in new product development (NPD), Mondelez is also leveraging generative AI in marketing campaigns, setting new standards in creativity and customer engagement:

  1. Mondelez is utilizing AI to analyze historical data sets, which helps in informing their new product development (NPD) strategy. This leads to more innovative and efficient product development processes.
  1. Mondelez sees potential in AI to streamline various aspects of their operations, from product development to supply chain management. The company is exploring how AI can be effectively leveraged in various stages of their value chain, from ingredient sourcing to final product delivery.
  1. The company has found that AI can significantly expand the scope of creativity within project constraints. By leveraging AI, product developers can consider a wider range of variables and possibilities without extending project timelines or budgets. This has led to more innovative and efficient product development processes.
  1. AI in Marketing - A notable example of AI's impact on marketing is their Cadbury My-Ad campaign. They utilized Generative AI, featuring Bollywood star Shah Rukh Khan, to create a highly personalized advertising experience. By developing a microsite, they enabled small businesses and individuals to create their own versions of the ad. This approach led to the creation of over 130,000 unique ads, garnering more than 30 million views and engagements, significantly enhancing customer engagement and loyalty.
How Mondelez AI works


Why We Think Mondelez is a Top AI Consumer Stock to Buy:

In Q3 2023, Mondelez International showcased significant growth, reflected in its financial results.

The company's net revenues impressively increased by 16.3%, reaching $9.1 billion. This growth was largely fueled by a robust 15.7% rise in organic net revenue, supported by strong volume/mix performance across all regions. Earnings per Share (EPS) markedly increased by 84.6% to $0.72, underlining the company's increased profitability.

During the first nine months of the year, Mondelez returned a whopping $2.2 billion to its shareholders, a comprehensive return that included dividends and share repurchases. This underscores Mondelez's strong commitment to delivering shareholder value. In response to its strong financial performance, Mondelez upgraded its Organic Net Revenue outlook to a growth of 14% to 15% and raised its EPS growth outlook to approximately 16%. The company's performance in Q3 2023 indicates a solid resilience in its core categories, like chocolate, biscuits, and baked snacks, even as it navigated through market challenges and rising costs for key ingredients and transportation.

Final Thoughts:

The consumer sector stands poised for an AI revolution that is already underway at innovators like Walmart (WMT), Ulta Beauty (ULTA), and Mondelez (MDLZ).

As these companies demonstrate, AI enables enhanced personalization, productivity, creativity, and customer experiences. While integrating AI poses some profitability challenges initially, the long-term growth potential is immense.

Companies that strategically invest in and deploy AI, with a focus on adding true value for customers versus novelty, can gain sustainable competitive advantages.

For investors, identifying these AI leaders in the consumer space could lead to outsized returns in the coming years. However, as with any emerging technology, there are risks around adoption rates, implementation costs, and real-world viability. But for consumer stocks on the leading edge of responsibly harnessing AI's power, the future looks bright.



Frequently Asked Questions:

Q: How is AI transforming the consumer sector?

A: By enabling personalization, predictive analytics, process optimization, and new customer experiences that create value.

Q: What AI capabilities is Walmart implementing?

A: Personalized search and recommendations, voice shopping, design tools with AR, and AI assistants to boost productivity.

Q: How has Ulta Beauty embraced AI in beauty retail?

A: With innovations in virtual try-on, shade matching, robotics, and investments in startups to enhance digital experiences.

Q: How does Mondelez use AI in marketing and R&D?

A: To expand creativity in product development and deliver highly personalized ad experiences that increase customer engagement.


-Investing Insider Staff
This article is informational purposes only and is not investment advice.  See full disclaimer here
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