Walmart - Memes for the people and returns for investors?

[Sijoittaja-alokas]

Walmart is an American multinational retail corporation that operates a chain of hypermarkets, discount department stores, and grocery stores in the United States and 23 other countries (surprisingly few, in my opinion!). The company’s headquarters are located in Arkansas, and it was founded by brothers Sam and James “Bud” Walton in 1962 in Rogers, Arkansas. In 1969, the company was incorporated under the Delaware General Corporation Law.

As of October 2022, Walmart had 10,586 stores in 24 different countries, operating under 46 different names. In the United States and Canada, it is known as Walmart; in Mexico and Central America, Walmart de México y Centroamérica, etc. Walmart is the world’s largest company by revenue and also the world’s largest private employer, with 2.1 million employees. In 2023, the company’s revenue was $611.3 billion.

Walmart is a family-owned business, controlled by the Walton family, who own over 50 percent of the company. The company has been very successful in the United States, but its internationalization has met with varying degrees of success.

Investor’s perspective:

Walmart will continue to have numerous opportunities, but also significant challenges. The company can leverage growth opportunities offered by global expansion and strengthen its position in e-commerce. Diversification into new business areas, such as health services, and the utilization of new technologies can also bring significant benefits. Additionally, due to its large size, the company can negotiate competitive purchasing prices, which allows it to offer customers low-priced products while achieving a satisfactory margin. This makes it difficult for competitors to challenge Walmart – at least in this regard.

At the same time, Walmart will, of course, face fierce competition, economic fluctuations, and increasingly rapidly changing consumer habits. Furthermore, there is concern about how the company will keep up in the AI-driven e-commerce landscape… well… but for now, the company has received additional support for its growth from it. Walmart must constantly monitor market developments and adapt to changing conditions to maintain its competitive advantage. Internationalization is one of the biggest questions, and it has gone somewhat variably for the company.

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Next Thursday, the company will report its Q2 results.

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11.8.2024:

P/E ratio: 29.06

Dividend yield: 1.22 %

Market capitalization: 546.56 billion USD

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First quarter 2024:

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Stock history:

[Aili]

Good start.

This is probably already obvious to all the seasoned veterans on the forum.

The most important thing to know about Walmart is that it has been the world’s largest company by revenue since 2014.

But even though it has a lot of revenue, the margins are outrageously thin.

This is already a bit old, Q1’24, showing just how outrageously poor the margins are.

This has been the case and it’s hard to see Walmart being able to raise its margins much, because it’s branded as a discount retailer, scaling and efficiency have been taken to extremes, and their data analysis skills and their utilization for things like product placement have long been textbook examples.

Unless it somehow changes its business significantly.

It was interesting to note that Amazon is catching up to Walmart in revenue.

For comparison
Amazon net profit Q1’24 was 10.4B and Walmart’s 1.9B

A higher net profit allows the company to invest in new business areas that support growth.

[viljo]

Just a tidbit: since I own Vusion Group myself, I know that Walmart is currently digitalizing its stores; for example, this makes pricing more flexible and will likely save money in the long run.

Walmart also received some warrants to acquire a stake in Vusion. I think it was about a billion-dollar investment on Walmart’s part.

[Sijoittaja-alokas]

@Aili

Good start.

Thanks.

Thanks also for the message in the thread; it provided good additional information and reflection on the company.

@Arhi_Kivilahti has covered Walmart on several occasions, so I went to his X account to spot a few things.

and here is a bit of an article about it, and I’ll summarize it a bit:

Walmart’s revenue grew by 6% in the last quarter, with growth coming particularly from the international segment (+12%) and US e-commerce (+22%). E-commerce accounted for 66% of US growth and at least surpassed Amazon’s growth rate. E-commerce was still loss-making at least at that time, but according to the article, it brings in significant new revenue and also increases margins. Internationally, e-commerce grew by 19% and represented 36% of Walmart’s total growth overall. E-commerce made up 16.1% of Walmart’s US sales in Q1/2024.

Ecommerce and international driving growth at Walmart — Ada Insights

Spotted “via” Arhi:

https://x.com/juokaz/status/1791474755088073149

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Amazon’s stock performance certainly says a lot about its success, and for Walmart, that curve has indeed been a bit different recently. Of course, it’s clear that they are different from each other in almost every way, even though there are common elements.

Walmart’s e-commerce side is probably an interesting factor for investors, and perhaps how else they plan to expand internationally.

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I don’t know either company very well; I’ve read more about companies like Kesla, Piippo, and PunaMusta Media (why ), so I’m operating with light background information (as I almost always do) in my arguments, etc.

[heissuli]

You can’t really compare Amazon and Walmart directly, though. Personally, I would rather compare Amazon to Google, Apple, and other big tech companies because of its AWS, advertising business, and Prime.

[Aili]

I think they are often compared to each other because both have a lot of revenue. Walmart has held the position of the world’s largest company by revenue for quite a long time, and it serves as a bit of a warning that a company should grow profitably.

Amazon has transformed from a bookstore into an e-commerce business that handles logistics efficiently, where you can order almost anything.

Walmart is a bit like Stockmann (Stokka). The digital transformation has been a long time coming. Of course, Walmart already understood back in the 90s to adopt digital tools. Unlike Stockmann, a small annual profit has prevented it from becoming a company in crisis.

[Sijoittaja-alokas]

Walmart ja Q2

https://x.com/EconomyApp/status/1824080237476319295

CEO:

“We’ve used multiple LLMs to accurately create or improve over 850,000,000 pieces of data in the catalog. Without the use of generative AI, this work would have required nearly 100X the current headcount to complete in the same amount of time”

[Verneri_Pulkkinen]

I briefly touched upon Walmart in today’s Vartti.

What stands out is the evolution of the company’s stock valuation.

Like other growth stocks, Walmart’s share was in a bubble at the turn of the millennium. A bubble referred to as the “tech bubble.” But more generally, it was a bubble of growth companies.

In the early 2010s, even this high-quality retail giant was available at a forward P/E of around 10x. Now, the valuation is back at tech bubble levels!

[Sijoittaja-alokas]

Below is a tweet by Arhi Kivilahti. I added the link from the tweet below it.

E-commerce accounted for nearly 45% of Walmart’s growth. In the entire U.S. retail market, e-commerce represented 52 percent of the growth, and its share of all retail rose to 15.7 percent. E-commerce is the biggest growth opportunity for retailers in the coming years.

https://x.com/ArhiKivilahti/status/1827942194038063263

https://adainsights.com/blog/ecommerce-driving-growth-for-walmart-target-and-the-us-retail-market

[Sijoittaja-alokas]

Walmart’s memberships are also at ATH levels now.

I wonder if this company will ever expand aggressively abroad?

https://x.com/carlquintanilla/status/1836021795230540185

[Sijoittaja-alokas]

Walmart’s revenue grew by 5.5 percent and reached 169.6 billion dollars. Adjusted earnings per share was $0.58. Operating income rose 8.2%, driven by improved margins and smaller eCommerce losses.

E-commerce sales grew globally by 27 percent and the advertising business rose by 28 percent. Pickup and delivery from US stores grew particularly fast; additionally, inventories decreased by 1 percent and availability levels remained good.

Walmart CEO Doug McMillon emphasized the continued strong performance and meeting customer expectations regarding value and convenience.

https://x.com/amitisinvesting/status/1858845445461581898

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EDIT:

https://x.com/EconomyApp/status/1858930633952858538

[Sijoittaja-alokas]

Walmart’s “corporate bonuses” are set to exceed targets this year, as the company’s stock price rose and sales performed strongly.

Employees working in the United States can receive up to 120 percent of their “performance bonus.” The strong growth was due to the success of grocery and new businesses, such as advertising. Walmart’s results are clearly better than competitors’ like Target, which lowered its forecasts due to weak demand.

The Bentonville, Arkansas-based retailer told US-based corporate employees they can expect to earn as much as 120% of their eligible bonuses, people familiar with the matter said. The final amount won’t be determined until the fiscal year finishes at the end of January, they added.

Walmart’s corporate employees earn a base salary with a bonus on top that varies by role. Walmart calculates the annual bonus payout based on company and individual performance, with a target of receiving 100%. Last year, corporate employees received 125%, the highest possible amount, according to a person familiar with the matter.

No wall.

BNN Bloomberg - Canada Business News, TSX Today, Oil and Energy Prices

[Sijoittaja-alokas]

Not necessarily very relevant considering this as an investment case, but interesting nonetheless.

Walmart pays better than I did (at least in that job), compared to the job I had years ago.

https://x.com/StockMKTNewz/status/1882403792555020457

[Roope_K]

I almost fell off my chair when I checked in on how Walmart is doing after a long time.

So this is currently valued at a +50x PE ratio, even though growth and growth forecasts are still at the usual 5% level?

Has WMT also become an AI company, or what is being seen here that I don’t see myself?

[Clark_kent]

I looked at WMT as a potential AI beneficiary some time ago, but it seemed expensive. It is really in an overbought state now.

https://tech.walmart.com/content/walmart-global-tech/en_us/flagship-conferences/ai-at-walmart/replay-2024.html

[Sijoittaja-alokas]

Here’s a pretty good tweet about the valuations of the AI company Walmart.

https://x.com/KoyfinCharts/status/1889370077881069748

[Sijoittaja-alokas]

Here’s a tweet about Walmart insider moves, quite a lot of red visible. Of course, for the most part, these are not big moves relative to what they own.

https://x.com/BankTheTrade/status/1891257982249222151

[Sijoittaja-alokas]

Walmart reported a better-than-expected quarter.

Revenue grew broadly across different segments, especially in the United States. Growth was aided by strong demand in groceries, an expanded product range, and also the growth in sales of health and wellness products.

The markets didn’t like this: The guidance for the coming year is cautious

https://x.com/EconomyApp/status/1892606697710956597

Here is:

OFFICIAL MATERIAL.

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EDIT:

Let’s also add this observation from a longer timeframe:

https://x.com/finchat_io/status/1892597593483665534

[Sijoittaja-alokas]

@Arhi_Kivilahti’s Twitter thread about Walmart and Amazon. This theme has already been discussed in the Amazon thread, so I’m posting it here this time.

https://x.com/ArhiKivilahti/status/1896810360700887180

The rest of the Twitter thread

[Sijoittaja-alokas]

@Arhi_Kivilahti has written about, among others, Walmart, Costco, and a few other companies.

https://x.com/ArhiKivilahti/status/1899348809995460908