Walmart Stores (WMT) is a low-cost leader in clothes, food and home goods. And like its chief rival Costco (COST), Walmart has increasingly gotten into other consumer areas, including prescription eyeglasses and auto services.
So WMT stock investors should not be surprised that the latest venture from this retail giant is to enter the health insurance marketplace.
According to a recent press release, “Walmart is working with DirectHealth.com to launch Healthcare Begins Here, an in-store program designed to educate customers on health insurance options.”
Now, WMT has no plans to be an insurer. Furthermore, its partner DirectHealth also has no aims to underwrite policies itself. Instead, DirectHealth.com is a portal that “offers access to more than 1,700 plans from 12 leading carriers” that include Aetna (AET) Cigna (CI), Humana (HUM) and UnitedHealth Group (UNH), among others.
In other words, WMT stock holders will enjoy a referral bonus as will the DirectHealth agents staffing some 2,700 Walmart stores to enroll customers.
The good news is that Walmart shoulders little of the risk here when it comes to the insurance process, but you have to wonder how much profit there is to be scraped off here with two middlemen peddling policies for Big Insurance.
Furthermore, you have to wonder just how cheap these policies can be if they have that many mouths to feed.
However, WMT stock quoted a Kaiser Family foundation survey in its announcement of the health insurance sales, saying that “60 percent of people have difficulty understanding their health insurance plan options and nearly 40 percent feel they picked the wrong plan after enrollment.”
So perhaps there is a need to be filled after all.
And given the big success of other WMT health efforts like flu shots and eyeglasses, this could indeed be a new source of revenue for the big box store.
It certainly needs it … WMT stock has gone nowhere in the last two years vs. a 24-month return of 35% for the S&P 500 in the same period. Same-store sales have been soft, and Walmart investors are eager for new revenue streams no matter how large or small.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at email@example.com or follow him on Twitter via @JeffReevesIP.