Walmart (WMT) saw strong e-commerce sales in its first quarter, with delivery business volume surpassing in-store pickups. TD Cowen Senior Research Analyst Oliver Chen joins The Morning Brief to break down the retail giant's performance as consumer wallets tighten amid sticky inflation.

Chen calls Walmart a "top pick," saying it offers "both needs and wants" of the consumer. He says the grocery business remains critical to Walmart, accounting for over 50% of its revenue. However, the company also offers great value for bigger ticket items.

He points to the Walmart+ membership program as an area gaining momentum, offering customers free shipping and savings on gas, among other perks.

While Target (TGT) has been pushing higher-end apparel, like its collaboration with Diane von Furstenberg, Chen says that Walmart "does a great job" with staples like underwear and basic apparel. "The opportunity is for Walmart to be more like a lifestyle brand and apparel, and expand into dresses, amplify their presence in denim, and trade the customer up," he explains. He adds that the company has already started to remodel stores and add more private-label brands to appeal to higher-end consumers.

"We also see what we say is 'customized moderation,' meaning customers are both scrambling and splurging, trading up and trading down...Everybody wants to look good and fashionable, and you can do that at a very good price," he says.

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This post was written by Melanie Riehl