Thanks for Visiting!

Register for free to get the full story.

Sign Up
Already have a account? Log In
Back to The Anchor

Walmart: Improved Outlook for 2024

Thomas Paulson
Feb 23, 2024
Walmart: Improved Outlook for 2024

Walmart reported solid fiscal Q4 results this week, which reflects a strong holiday period and a nice lift in January where adverse weather pushed potential restaurant patrons into grocery stores. Additionally, the company's ancillary businesses--Walmart Connect, marketplace, and advertising--are producing dollar volume growth that moves the needle (+$600M year-over-year in revenue according to our estimates, or nearly half of Walmart U.S. segment profit growth).

As was the case last quarter, Walmart is leaning into value via advertised lower prices which is leading to market share gains (on a unit basis), physical store comparable-transactions, and growth in higher-income households. Contributing to that growth are refreshed and remodeled stores, including 700 locations in 2023 and 650 planned for 2024. Based on visitation trends, we estimate that the remodels themselves may be delivering up to full point of comparable sales growth; for Walmart, one point of comparable sales growth is worth +$1B. Walmart is also opening 150 locations over the next five years; these will be in existing markets where they need to take the pressure off some high-volume locations.

On a comparable dollar basis, e-commerce sales were up +$2.7B (+17%) and physical stores were up +$1.8B. The +$2.7B growth in e-commerce was driven by advertising, third-party sellers (+20% more sellers year-over-year, resulting in a +45% increase in third-party revenue), and a double-digit increase in curbside and store delivery. On a percentage basis, physical store comparable-store sales increased +1.6% despite a -0.3% decline in average ticket. The decline in ticket reflects lower prices in general merchandise. Walmart is also cutting grocery prices, but that is leading to a strong consumer response and higher volume made up for the lower prices; this is evident in the stable two- and three-year comparable-store sales CAGR trends (below). On a one-year basis, grocery comparable sales were up mid-single-digits. The general merchandise category saw a low-single-digit decline in comparable sales, reflecting price cuts and the pull-forward of demand into 2020-2021. Categories like home, fashion, and hardlines were up on a unit-basis.  

As it relates to consumer spending and the health of the consumer, Walmart CEO Doug McMillon shared that holiday sales were “better than expected.” The company expects a +3%-4% comparable-store sales increase this year; while less than 2023 (+6.6%), there is little inflation in the +3%-4% forecast, meaning increased transactions will be the company's key growth driver. Walmart CFO John David Rainey shared, “We feel a little better about the health of the economy right now.” Walmart U.S. President and CEO John Furner said, “The sell-throughs were really strong throughout the fourth quarter.” (Walmart produced excellent margins and profit growth for Q4.)

On Sam’s Club, membership income was up +10%, but comparable-sales were softer with physical store comparable-store sales increasing only +1.2% (this also reflects the lower rate of inflation and a decline in big-ticket categories). Category-wise, consumables saw a mid-single-digit increase in comparable sales; general merchandise was down. Toys, furniture, sporting goods, office supplies, and consumer electronics were all flagged as “soft.” For 2024, Sam’s intends to lean into demonstrating value and ease-of-shop with further enhancements to Scan-&-Go (extending it to “just walk out”) and curbside. For the quarter, Scan-&-Go penetration increased +270 basis points.

The other notable development coming out of Walmart’s Q4 2023 update was its $2.3B purchase of Vizio, which manufactures smart TVs and operates the SmartCast Operating system which now spans 18M active accounts. There are several potential positives from this transaction, as Corey Tarlowe, Senior Vice President Equity Research from Jefferies, discussed on this week’s Q1 Consumer Trends webinar with Ed Lavery:

“Walmart has had a history of making acquisitions. They've purchased apparel brands, they've purchased supply chain companies, and now they've made their latest acquisition of a TV manufacturer. I think that the strategy behind this is…first, it can help to lower the prices of their TVs that they offer. This could obviously offer better value to their customers who are…becoming more value conscious. This could be a critical component in an area where it's a bigger ticket item but consumers are a little bit stretched and looking for value. This could be a great way for Walmart to offer value to their customers. The second aspect of this really is more about data and advertising [and a focus on retail media]...It's still very, very early in terms of the development of this aspect. We do know that Walmart processes over 40 petabytes on a regular basis just of consumer data. They purchase or they have billions of data points in their supply chain that they're constantly synthesizing. This is another data asset that they can harness and then potentially turn into advertising revenue."

Schedule a Call

Please enter your email

Thanks for reaching out!

I’ll be in touch soon

Go Back
Oops! Something went wrong while submitting the form.

Thomas Paulson

Director of Research and Business Development,

Thomas Paulson spent 20 years as a Wall Street analyst and a member of asset management teams at AllianceBernstein and Cornerstone Capital, representing top-50 ownership positions including Target, Home Depot, Nike, Amazon, Google, and many more. He brings consumer related expertise and knowledge of enterprises in retail, CPG, financial services, telecom, and entertainment.

Schedule a Call
Related Articles