Note: Walmart's FY'22 ended on January 31, 2022. Q1 FY'23 refers to the quarter that ended on April 30, 2022.
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:
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 $573 billion in annual revenues and over 10,593 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.
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.
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.
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.
The retailer launched its loyalty program Walmart+ at $98/year by the end of 2020. This subscription is priced lower than the $119/year subscription of Amazon Prime. This service expands 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.