With Walmart’s fourth-quarter earnings report just in, it’s looking like a totally different company. Walmart (WMT -1.39%) beat expectations on both top and bottom lines. Walmart U.S. posted mid-teens comparable sales growth in grocery in its core markets. In spite of inflationary pressure, comparable sales in its biggest segment rose 8.3% and operating income too.
Despite being the biggest retailer in the country with “everyday low prices,” Walmart has reinvented itself over the past few years by adding grocery pickup stations, launching the Walmart+ membership program, and expanding its advertising business. Walmart’s core business is doing well, but its top competitors like Amazon (NASDAQ: AMZN) and Costco Wholesale (NASDAQ: COST) aren’t doing as well.
In the U.S., Walmart, Amazon, and Costco are the three biggest retailers, and Costco’s stock performance has lacked Walmart’s for a while. The Amazon model of retail has long been admired, while Costco is admired for its well-run membership-based warehouses and Walmart was once a retail powerhouse. Now it’s just a relic of a time when e-commerce snuffed out its competitive edge. Despite that, Walmart keeps gaining market share on Amazon and Costco, while still maintaining its core strengths.
Walmart, for instance, had 17% growth in its U.S. e-commerce segment in the fourth quarter thanks to pickup and delivery from the store along with advertising, while Sam’s Club had 21% growth thanks to curbside pickup and ship-to-home. E-commerce was the biggest part of the company’s revenue for the full year, generating over $80 billion in sales, or 13 percent of total revenue. In constant currency, Amazon’s revenue grew 12% in the fourth quarter. With constant currency revenue growth of 14% in North America, while with constant currency revenue growth of just 5% in international, it’s doing pretty well. First-party e-commerce, or Amazon’s online stores segment, only increased by 2% to $64.5 billion in the quarter, which means Walmart gained market share against Amazon.
Walmart’s own warehouse club Sam’s Club is also outperforming Costco. Walmart’s sales of its membership-based warehouse club grew 12.2% excluding fuel in the quarter, driving revenue to $21.4 billion, up 11.3%. Membership income jumped 7.1% due to a fee hike in October. Despite having a different reporting calendar, Costco’s comparable sales only rose 7.1% excluding fuel in the 22 weeks up to the end of January, losing market share too.
In spite of Walmart’s $611 billion in revenue last year, it’s still got room for growth in e-commerce and Sam’s Club. Part of the reason Walmart is outgrowing Amazon is because Walmart can grow in areas like groceries, online pickup, and store-based delivery that Amazon hasn’t really touched. E-commerce, in particular, remains a ripe market.
It’s clear Walmart has the potential to turn Sam’s Club into a business as valuable as Costco with its recent performance. The company said it expects a challenging and uncertain year ahead, and its guidance was conservative: adjusted earnings per share of $5.90 to $6.05, or $6.04 to $6.19, excluding the last in, first out (LIFO) adjustment. This guidance was below the consensus of $6.50 and below the results for 2022. The company is facing a tough year as consumers fear inflation and a recession, but its new businesses like Sam’s Club and e-commerce show it’s well positioned. With it’s capturing market share and building out new profit streams, the stock looks like a good buy right now.
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Alexis Boutilier is from Vancouver, British Columbia. She has a high interest in all things tech and loves to stay engaged on all the latest appliances and accessories.