How Important Is Sam’s Club For Wal-Mart?
Sam’s Club, a membership-only warehouse club operated by Wal-Mart (NYSE:WMT), contributes about 12% of the company’s revenues and 6% of the company’s value, as per our estimates. This is because Sam’s Club operates on a lower operating margin than Wal-Mart’s other segments. We expect Sam’s Club to report a gross margin of around 12% in 2016 compared to about 27% for the other Wal-Mart divisions.
Going forward, we expect Sam’s Club revenue to grow at compounded annual growth rate (CAGR) of 3.1% through 2021, faster than the revenues from other segments, which we expect to grow at a CAGR of around 1%. Sam’s Club is expected to grow on the back of initiatives such as of improving the food in the stores and expanding warehouses in higher-income areas.
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