Wal-Mart (WMT) Last Update 9/26/21
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TREFIS Analysis

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Potential upside & downside to trefis price

Wal-Mart Company


  1. Wal-Mart US constitutes 74% of the Trefis price estimate for Wal-Mart's stock.
  2. Wal-Mart International constitutes 20% of the Trefis price estimate for Wal-Mart's stock.


  1. Sales Gains Slowed in Q1
As expected, sales gains slowed as comparable-store sales growth hit 6% compared to the 9% increase Walmart enjoyed through 2020. Yet that expansion came on top of a huge spike a year ago, when consumers were busy packing their pantries during the initial phase of economic lockdowns around the world. Stepping back, revenue trends are still strong, with comps rising 16% over the past two years. Walmart said the boost was supported by federal stimulus measures and from pent-up demand across both discretionary and consumer staples niches. Customer traffic remained negative at stores, but the 3% drop in Q1 was a big improvement over last quarter's 10% slump. And that pressure was easily offset by higher spending per visit, along with booming demand in the online niche.

  1. Company Guidance
Walmart modestly raised its outlook for the second quarter and for the wider fiscal year on both sales and operating income. The retailer expects continued pent-up demand benefits throughout fiscal 2022. Walmart still plans to spend over $14 billion on the business this year, representing a huge increase over a normal year. That fortune will go toward typical projects like remodels, but is mainly aimed at building a stronger infrastructure to support its elevated sales volumes -- especially in the online business.

  1. Walmart+ Expected To Compete With Amazon Prime
The retailer is reportedly launching a new loyalty program Walmart+ at $98/year (lower than the $119/year subscription of Amazon Prime). This service will expand upon its existing same-day grocery delivery service, Delivery Unlimited - with discounts on fuel, early access to product deals, and other perks such as reserved delivery slots. By leveraging the company's advantages in grocery and its store base, the new service can boost sales, lock in a loyal customer base, and reward customers. The exact launch date and related perks are yet to be confirmed by the company.

  1. Walmart To Discontinue Jet.com
Nearly four years after a $3.3 billion purchase of Jet.com, Walmart is winding it up now. Jet had helped Walmart build up its e-commerce business. However, visits to Jet.com plummeted despite efforts to rebrand the site for urban customers. The company cited the continued strength of the Walmart.com brand as a part of the reason for this exit.

  1. E-Commerce: Strong Revenue Driver

Wal-Mart's e-commerce operations include all web-initiated transactions, including those through Walmart.com such as ship-to-home, ship-to-store, pick up today, and online grocery, as well as transactions through Jet.com. The majority of growth is organic through Walmart.com, including online grocery, which is growing quickly.

  1. Growth in Omni-Channel Initiatives

Walmart U.S. provides omnichannel experience to customers, integrating retail stores and eCommerce, through services such as Walmart Pickup, Pickup Today, Grocery Pickup, Grocery Delivery, and Endless Aisle. As of January 31, 2021, the company had over 7,300 Grocery Pickup locations and nearly 5,200 Grocery Delivery locations.


Below are key drivers of Wal-Mart's value that present opportunities for upside or downside to the current Trefis price estimate for Wal-Mart:

Wal-Mart U.S.

  • US Revenue per Square Foot:Going forward, we expect Wal-Mart's revenue per square foot to increase gradually from $526 currently to $588 by the end of our forecast period. However, there can be an upside of close to 5% if this figure ends up around $595 by the end of our forecast period driven by online growth and smaller store expansion. On the contrary, there can be a 5% downside to our price estimate if this figure only increases to $567 due to persistently weak consumer confidence, a fall in foot traffic, and self-cannibalization.
  • US Number of Stores: We estimate the number of Wal-Mart stores in the U.S. to grow from about 4,750 in FY 2021 to about 4753 by the end of our forecast period There can be a downside of approximately 5% to our price estimate if the store count decreased to only 4,700 in a situation where the company scales down its small store expansion.
  • U.S. Gross Margins: We estimate this figure to marginally increase from the current level of 26.5% to 27.1% by the end of our forecast period. There could be a downside of about 5% to our price estimate if rising input costs lead to a decline in margins to about 26.2% by the end of our forecast period. On the contrary, the retailer keeps leveraging its huge buying power to get discounts from vendors, and margins reach 28%, there can be 5% upside to our price estimate.

For additional details, select a driver above or select a division from the interactive Trefis split for Wal-Mart at the top of the page.


Wal-Mart is the largest retailer in the world with nearly $559 billion in annual revenues and over 11,443 stores worldwide. The company sells goods across almost all merchandise categories including groceries, electronics, appliances, apparel, sporting goods, home furnishing products, and drugs, while strictly adhering to its EDLP (everyday low price) strategy. However, it earns around half of its revenues from groceries.

Wal-Mart operates in three business segments: Walmart U.S., Walmart International, and Sam’s Club. Walmart U.S. segment is the largest segment of its business, accounting for approximately 60% of its revenues. Sam's Club is the retailer's warehouse model where it charges its customers an annual membership fee, allowing them to buy products at heavy discounts.


The U.S. segment is the most valuable to the company. Wal-Mart has built a trusted brand with a clear value proposition and has expanded across the U.S., resulting in it becoming the nation's largest retailer.

Wal-Mart U.S. stores are bigger and yield more revenue per unit of retail space

Although Wal-Mart has fewer stores in the U.S. compared to international markets, an average U.S. store is about 2.5 times as big as the international store in terms of retail square footage. As of fiscal 2021, square footage per store for Wal-Mart US was 148,200 while that for Wal-Mart International was 55,300. Revenue per square foot for Wal-Mart's U.S. stores in FY 2021 was higher at $484 versus $359 for Wal-Mart's International stores. Thus, despite being similar in store count, the U.S. segment is more valuable to the company compared to its international segment.


Threat of self-cannibalization due to massive size

Like any retailer, Wal-Mart’s long-term sales and income growth depend largely on the company’s ability to open new stores and expand into new markets. However, due to Wal-Mart’s size, it runs the risk of cannibalizing its own sales figures in the U.S., thereby effectively competing with itself for market share. This is the reason why Wal-Mart has slowed down its Supercenter expansion in the U.S.

Improving store productivity and smaller stores in urban markets

Opening more Supercenters and large format stores may be difficult for Wal-Mart due to its massive presence in the U.S. The company is, therefore, focusing efforts on increasing its store productivity. To achieve this, the retailer has been remodeling its stores and converting its discount stores into supercenters. While Wal-Mart’s discount stores offer a wide assortment of general merchandise and a limited variety of food products, its supercenters offer a full-line supermarket and general merchandise.

Wal-Mart’s executives have indicated that the retailer’s future stores will occupy 8% less space, cost 16% less and will run more efficiently. The retailer’s smaller stores, called Neighborhood market stores, are one-tenth the size of a typical Wal-Mart Supercenter and offers 15,000 items in comparison to 100,000 offered at a Supercenter. Although the size is much smaller, Neighborhood markets offer day-to-day groceries & general merchandise and are focused on attracting customers who shop regularly for their daily needs. This format can be successful in big cities, which have space constraints and where busy schedules limit many customers from driving to a supercenter.