Market Capitalization: $762.85 Billion
Shares Outstanding: 8.03 Billion
Sector: Consumer Defensive
Industry: Discount Stores
Analysis as of: December 11, 2024

1.  Company Overview

Walmart Inc. (NYSE: WMT) is the world’s largest retailer, operating a vast network of hypermarkets, discount stores, and grocery outlets under various banners worldwide. Beyond physical retail, Walmart has aggressively expanded into e-commerce, pickup, and delivery services, as well as fintech ventures, health & wellness services, and advertising solutions, aiming to create an omni-channel ecosystem serving diverse consumer needs.

Core Segments:

• Walmart U.S.: The largest segment, including supercenters, Sam’s Clubs, and neighborhood markets.
• Walmart International: Operations in key global markets with a focus on growth in Latin America, Africa, and parts of Asia.
• Sam’s Club: Membership-only warehouse clubs offering bulk goods and value-oriented merchandising.

Strategic Focus:

• Omni-channel retail experience: Integrating online, mobile, and in-store shopping.
• Everyday low prices: Leveraging scale to keep prices competitive.
• Expanding services and digital capabilities, including Walmart Connect (advertising), Walmart+ membership, and financial services.

2.  Financial Performance

a. Revenue and Growth

• TTM Revenue: $673.82 Billion
• YoY Revenue Growth (TTM): +5.48%

Revenue Trend (in Billions USD):

Fiscal Year End    Revenue YoY Growth

Jan 31, 2020   523.96    1.86%

Jan 31, 2021   559.15    6.72%

Jan 31, 2022   572.75    2.43%

Jan 31, 2023   611.29    6.73%

Jan 31, 2024   648.13    6.03%

TTM 2024     673.82    5.48%

Analysis:

• Strong top-line growth sustained by e-commerce expansion, increased market share in groceries, and strategic store formats.
• Consistent revenue growth reflects Walmart’s resilience and its ability to navigate competitive pressures and economic cycles.

b. Profitability

• TTM Net Income: $19.68 Billion
• EPS (TTM): $2.42
• Profit Margin (TTM): ~2.92%

Analysis:

• Thin margins characteristic of large-scale retail; small improvements in costs and mix can significantly affect profits.
• Recent profit improvements partly due to operational efficiencies, cost management, and growth in higher-margin segments like advertising and marketplace.

c. Margins

• Gross Margin (TTM): 24.70%
• Operating Margin (TTM): 4.31%
• Free Cash Flow Margin (TTM): ~2.52%

Analysis:

• Gross margin stable, reflecting Walmart’s scale-driven cost advantages offset by competitive price strategies.
• Operating margin around 4% is solid for mass-market retail, but far below specialized retailers or tech-driven companies.
• Healthy FCF generation allows for sustained dividends, share buybacks, and strategic investments.

d. Dividends & Capital Allocation

• Dividend Per Share (TTM): $0.83, yield ~0.87%.
• 51 consecutive years of dividend growth, indicating shareholder-friendly policies.
• Ongoing share repurchases, though modest, contribute to EPS stability and investor returns.

3.  Balance Sheet

• Cash & Equivalents: $10.05 Billion
• Total Debt: $63.58 Billion
• Net Cash (Debt): -$53.53 Billion

Analysis:

• Negative net cash common for large retailers, leveraging low borrowing costs and stable cash flows.
• Debt/Eq ~0.67, manageable given Walmart’s robust and predictable earnings profile.
• Consistent operating cash flow mitigates leverage risks.

4.  Valuation

• PE Ratio (TTM): 39.23
• Forward PE: 35.87
• PS Ratio (TTM): 1.13
• P/FCF Ratio (TTM): 44.87

Analysis:

• Valuation higher than historical norms; investors reward Walmart’s successful omni-channel transformation and resilience.
• EPS growth and stable dividends justify a premium; however, multiples appear rich relative to traditional retail peers.
• Market possibly pricing Walmart more like a consumer defensive + digital leader rather than a low-growth grocer.

5.  Market Performance

• 52-Week Range: $50.21 – $96.18
• 52-Week Price Change: +88.84%
• Beta: 0.55

Analysis:

• Significant stock appreciation, outperforming broader market and defensive peers.
• Low beta and strong price performance show Walmart’s attractiveness as a stable, defensive growth play.

6.  Financial Health & Risks

a. Growth Drivers:

• E-commerce growth (pickup, delivery, online marketplace).
• Expansion into advertising (Walmart Connect), healthcare services, and fintech solutions, diversifying revenue streams.
• Market share gains in groceries and essential goods.

b. Competitive & Operational Risks:

• Fierce competition from Amazon, Target, Costco, and emerging digital players.
• Margin pressure from ongoing price competition and wage inflation.
• Execution risk in integrating tech solutions and maintaining cost leadership.

c. Macroeconomic Environment:

• Sensitive to consumer spending trends, inflation, and commodity pricing.
• Global operations expose Walmart to currency fluctuations and geopolitical risks.

7.  Conclusion

Pros:

• Global retail leader with massive scale, brand strength, and supply chain efficiency.
• Successful omni-channel strategy driving consistent top-line growth.
• Strong cash generation supports dividends, share buybacks, and strategic investments.
• Emerging high-margin verticals (advertising, marketplace) could enhance profitability.

Cons:

• Valuation rich compared to historical averages and some peers.
• Thin margins and cost pressures limit near-term EPS expansion.
• Heavy competition in both physical and digital realms.
• High expectations priced in, leaving limited room for growth disappointments.

Disclaimer: This analysis is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results. Always conduct thorough research or consult a financial advisor before making any investment decision.