Is Walmart stock a good buy?

In this article, we review Walmart stock to determine if it’s a good buy, sell, or hold.

Walmart is a retail corporation founded in 1962 and headquartered in Bentonville, AR.

As of January of 2022, they have 10,593 stores in 24 countries including Botswana, Canada, Chile, China, Costa Rica, El Salvador, Ghana, Guatemala, Honduras, India, Kenya, Lesotho, Malawi, Mexico, Mozambique, Namibia, Nicaragua, Nigeria, South Africa, Swaziland, Tanzania, Uganda, United States, and Zambia.

Walmart is the world’s largest company by revenue with $572B (2021). They are also the largest employer in the world with 2.2 million employees.

By comparison:

Amazon generates $469B in revenue and has 1.1 million employees.
Apple generates $365B in revenue and has 36,000 employees.
Microsoft generates $168B in revenue and has 182,000 employees
Target generates $106B in revenue and has 409,000 employees.

Although the company is primarily recognized as Walmart or Sam’s Club in the US, it operates under various names in other countries including Game Foodco (Botswana), Nacional (Brazil), Ekono (Chile), Pali (Costa Rica), Despensa Familiar (Guatemala), Flipkart (India), Bodega Aurrera Express (Mexico), and more.

Tykr Rating
Walmart Company History
Walmart Business Model
Walmart News
Walmart Competition
Walmart 4Ms
Walmart Financials
Is Walmart stock a good buy?

Tykr Rating

Summary: Overpriced
Score: 9/20
MOS: 13%
Share Price: $145
Sticker Price: $168

Walmart Company History

1945, Sam Walton was working at J.C. Penney when he bought a Ben Franklin store branch. His primary focus was high-volume and low-prices. Essentially he was on a crusade for the customer. The strategy to meet this objective meant finding low-cost suppliers. In the first year, he increased sales by 45%, generating $105K ($1.6M in today’s dollars). When the lease on the Ben Franklin store expired, he opened up a new store and called it Walton’s Five and Dime. This store is now the Walmart Museum.
In 1962, Walton opened the first Wal-Mart in Rogers, AR. The named Wal-Mart was inspired by FedMart, a store chain he highly respected.
By 1968, Wal-Mart had 18 stores and generated $9M in revenue.
In 1969, the company was incorporated as Wal-Mart, Inc. That same year they opened their first distribution center in Bentonville, AR. The addition of a distribution center allowed for faster supply deliveries to store locations and the company generated $44M in revenue.
In 1970, Wal-Mart went public on the New York Stock Exchange for $47/share. By this time they had locations in Arkansas, Kansas, Louisiana, Missouri, and Oklahoma.
In 1973, they expanded to Tennessee.
In 1974, they expanded to Kentucky and Mississippi.
In 1975, they expanded to Texas. By this time they had 125 stores, 7,500 employees, and generated $340M in revenue.
In 1987, their 25th year anniversary, they reached 1,198 stores, employed 200,000 employees, and generated $15.9B in sales.
By 1984, between 6% and 40% of products were sourced from China.
In 1988, Walton stepped down as CEO and was replaced by David Glass.
By 1990, Wal-Mart became more profitable than Kmart and Sears.
In 1990, they opened their first stores in California and Pennsylvania.
In 1995, they opened stores in Argentina and Brazil.
In 1997, Wal-Mart was added to the Dow Jones Industrial Average, the top 30 largest industrial companies in the stock market.
In 1998, Wal-Mart surpassed Toys “R” Us in toy sales.
In 1999, they bought Asda, a UK-based retailer for $10B.
In 2000, H. Lee Scott became the new President and CEO and the company generated $165B in sales.
In 2002, Wal-Mart become the United States’ largest corporation.
In 2005, Wal-Mart reported $312B in sales with more than 6,200 stores and employing 1.6 million employees.
In September of 2005, Hurricane Katrina hit the southern part of the US, impacting Alabama, Louisiana, and Mississippi. Due to Wal-Marts strong logistics network, they organized a rapid response and donated $20M of food and supplies to help those impacted by the Hurricane.
In 2005, Wal-Mart started to focus more on energy efficiency. They spent $500M a year to increase the truck fleet’s fuel efficiency by 25% and reduce store energy consumption by 30%. The company also introduced three experimental stores with wind turbines, solar panels, biofuel-capable boilers, and water-cooled refrigerators.
In 2006, they remodeled to appeal to a wider variety of demographics including affluent shoppers. As part of the strategy, they started offering high-end electronics, jewelry, and wine bars.
In 2007, they introduced the slogan “Save money. Live better.” replacing “Always Low Prices, Always” which was used since 1988.
In 2008, Wal-Mart removed the hyphen and became Walmart.
During the recession in 2008 and 2009, Walmart distributed $933M in bonuses to every full-time and part-time employee. This was in addition to the $788M in profit sharing, 401(k) contributions, and hundreds of millions of dollars in merchandise discounts for employees.
In 2010, Walmart acquired video streaming service Vudu for $100M.
In 2011, Walmart announced a program to improve the nutritional value of its store-brands over 5 years.
In 2014, some Walmart employees went on strike in major US cities demanding higher wages.
In 2016, Walmart announced it would close 269 stores, affecting 16,000 employees. 150 of the stores were located in the US. 95% of these stores were located just 10 miles from another Walmart store. At this time, Walmart was starting to place a stronger emphasis on ecommerce and the growth of supercenters which consisted of a retail and grocery store all-in-one.
In 2019, Walmart announced the launch of free one-day shipping on more than 220,000 products with a minimum order of $35.
In 2019, Walmart stopped selling c-cigarettes due to “regulatory complexity and uncertainty”.
In 2020, due to Covid-19, Walmart allowed employees to stay home and take unpaid leave if they felt uncomfortable coming to work. Employees who caught the virus who wanted to work would receive up to two weeks of pay to stay home. At this same time, Walmart launched a new service, Carrier Pickup, that allowed customers to order online and pick up food at the curb.

Walmart Business Model

How does Walmart make money?

Walmart’s revenue is broken down into the following categories by revenue percentage.

Grocery and consumables – 66% – This includes snacks, meats, dairy products, frozen food, alcohol, beauty products, pet supplies, baby products, and household chemicals.
Fuel and other – 12% – This includes gasoline, tools, power equipment, tobacco, and car batteries.
Home and apparel – 11% – This includes small appliances, bed & bath, furniture, fabrics, crafts, and home decor.
Health and wellness – 6% – This includes pharmacy, optical services, over-the-counter drugs, medical products, and clinical services.
Technology, office, and entertainment – 5% – This includes TVs, computers, cameras, toys, music, movies, video games, and books.

Walmart News

This article from investorplace.com states that Walmart raised its dividend per share to $2.24. This gives Walmart an annual dividend yield of 1.58% and marks the 49th year in a row the company has increased its annual dividend.

This article from pymnts.com states that Walmart will hire more than 5,000 associates in 2022 to support the fast-growing technology division of the company. As Walmart places more emphasis on ecommerce, they also need to support logistics, cyber security, and data analysis.

This article from pymnts.com states that Walmart is offering BetterUp for Caregivers and Easy Vitamin Plan subscriptions to US customers. BetterUp for Caregivers charges about $125/month and provides access to live group coaching and Easy Vitamin Plan charges about $50/month and is partnering with Walmart to offer personalized 28-day vitamin subscription plans. As quoted by Walmart’s Health and Wellness Merchandising Senior VP, Julie Barber, “We are committed to making wellness more accessible for our customers by offering a wide range of essential products and services at an incredible value.”

This article from reuters.com states that Walmart will now offer Walmart Plus to its employees for free. Walmart Plus is considered rival to Amazon Prime as Walmart Plus offers unlimited free shipping and fuel discounts. The Walmart Plus membership also includes a free six-month membership for Spotify Premium. What Walmart is trying to do is focus on employee retention. As other retail stores increase pay (Target just moved their minimum wage in the US up to $24/hour), Walmart is increasing its benefits.

Walmart Competition

Walmart (WMT)

Summary: Overpriced
Score: 9/20
MOS: 13%
Share Price: $145
Sticker Price: $168

Amazon (AMZN)

Summary: On Sale
Score: 14/20
MOS: 80%
Share Price: $2,947
Sticker Price: $14,815

Target (TGT)

Summary: Overpriced
Score: 9/20
MOS: 45%
Share Price: $215
Sticker Price: $389

Costco (COST)

Summary: Watch
Score: 11/20
MOS: 1%
Share Price: $542
Sticker Price: $548

The Kroger Co. (KR)

Summary: Overpriced
Score: 9/20
MOS: 1%
Share Price: $56
Sticker Price: $56

Walmart 4Ms

MOS (Margin of Safety): When looking at the numbers, Walmart does not look like an attractive buy. A 9/20 shows there is some room for improvement and a MOS of 13% shows there is some upside potential but not the 50% we like to see. When you take a look at the financials, the revenues are continuously increasing which is a great sign. The issue is the flat net income. Knowing that Walmart is a retailer, means they carry high operating costs, especially with 2.2 million employees.

Meaning: When the economy starts to decline as it did during the 2008 recession, consumers turn their attention toward lower costs goods. Companies like Walmart and McDonalds tend to withstand times like this because of lower prices. As of March of 2022, we’re not in a recession but the S&P500 is down about 10% while the Nasdaq is down about 19%. The reasons include the conflict between Russia and Ukraine, the anticipation of rising interest rates (to lower inflation rates), and Covid-19. Overall, there is a lot of fear in the market. When situations like this occur, it’s important to pay attention to history to see how some stocks perform. In this case, Walmart is worth paying attention to. As of the date of this stock review, Walmarts stock is near all-time highs while most stocks are well off all-time highs.

Moat: The challenge with this model is the competition. With ecommerce, the big threat is Amazon. With ecommerce and retail combined, Target will continue to be a top competitor. When it comes to groceries, Kroger is a big player to pay attention to. If Walmart wants to continue to grow, they need to focus on ecommerce. As Amazon continues to grow, Walmart needs to keep up. I would leverage more affiliate deals with Walmart Plus to sweeten the deal for consumers. The Walmart Plus with Spotify is great but I would go a step further and try to line up partnerships with Apple and Disney. Offering discounts on Apple products such Apple Watches, AirPods, and iPhones along with discounts to Disney+ will definitely entice more consumers to subscribe to Walmart Plus, and in return order more products online. The membership model for Amazon and Costco have proven to be smart plays. Walmart has some upside potential if they can execute this strategy.

Management: Doug McMillon has served as CEO since 2014. McMillon has worked at Walmart for 30 years where, as a teenager, his first job at the company was unloading trucks. He then climbed through the ranks in various leadership positions. The current Glassdoor rating of Walmart is 3.3 which is fairly low. Knowing there are 2.2 million employees, shaping a culture from the corner office is an impossible feat so we can take that rating with a grain of salt. Based on some research, I found an interview from hbr.org that shows some signs of humility, especially on the fact that Walmart was late to the ecommerce party. With CEOs, humility is a big deal. We like to see leaders who own mistakes even if they are not at fault. This comes with the territory. If something goes wrong, and it’s not your fault, a good CEO will own it but also clearly outlines a resolution and prevention plan in the future. From my perspective, I believe Walmart is in good hands with McMillon.

Walmart Financials

Now let’s take a look at the financials to get us closer to determining if Walmart stock is a good buy. A good value investor should be able to read the income statement, cash flow statement, and balance sheet and within 60 seconds have a pretty good idea of how the business is performing.

Revenue (Found on the Income Statement)

2018: $514B
2019: $523B
2020: $559B
2021: $572B
Revenue has consistently increased year-over-year which is a great sign.

Net Income (Found on the Income Statement)

2018: $6.6B
2019: $14.8B
2020: $13.5B
2021: $13.6B
Net Income has leveled off. Investors should keep an eye on this metric. This relates back to my comments on increasing memberships. Generating more revenue without costs against inventory is an easy way to increase the net income (profit).

EPS (Found on the Income Statement)

2018: 2.28
2019: 5.22
2020: 4.77
2021: 5.01
EPS has increased from 2020 to 2021 which is a great sign.

Free Cash Flow (Found on the Cash Flow Statement)

2018: $17.4B
2019: $14.5B
2020: $25.8B
2021: $11B
Free Cash Flow has fallen off. This is part of the reason why the stock is Overpriced.

Total Assets (Found on the Balance Sheet)

2018: $219B
2019: $236B
2020: $252B
2021: $244B
Total Assets are relatively flat. We would like to see assets increasing.

Total Liabilities (Found on the Balance Sheet)

2018: $139B
2019: $154B
2020: $164B
2021: $152B
The Total Liabilities have decreased which is a good sign, especially for a retail company with 2.2 million employees.

Total Debt (Found on the Balance Sheet)

2018: $58B
2019: $72B
2020: $63B
2021: $57B
The debt is also decreasing which is a great sign.

Total Equity (Found on the Balance Sheet)

2018: $72B
2019: $74B
2020: $80B
2021: $83B
The Total Equity has increased which is a great sign.