Walmart Inc (NYSE: WMT), Target Corp (NYSE: TGT), The Home Depot Inc (NYSE: HD), and Lowe’s Companies Inc (NYSE: LOW) reported earnings this past week, with all four companies beating analyst estimates as shown in Fidelity Earnings Calendar. The following visual depicts the top-line for Lowe’s Companies Inc, Target Corp, Home Depot Inc, and Walmart Inc from Q1 19 to Q2 21.
Combined, these four companies registered $234.56 billion in Net Sales and $13.92 billion in Net Earnings for Q2 21. The companies reported Earnings Per Share of $1.78, $3.64, $4.53, and $4.25 for Q2 21 compared to analyst estimates of $1.571, $3.49, $4.444, and $4.012, respectively. Even if you only consider Walmart’s U.S. sales for the above Net Sales metric, these four companies recorded $191.17 billion in Net Sales in the U.S. alone, up from $181.35 billion last year.
The following visual depicts the share price performance of Walmart Inc (NYSE: WMT), Target Corp (NYSE: TGT), The Home Depot Inc (NYSE: HD), and Lowe’s Companies Inc (NYSE: LOW) starting Jan 2020. I chose this x-axis because all four companies had to quickly adapt and expedite existing systems to adapt to the new normal of capacity & social restrictions and still execute deliverables to customers and shareholders. I would argue that these retailers essentially reformatted or revamped their existing channels to deliver at a time of extreme uncertainty, risk, and abnormalities. Furthermore, Lowe’s Companies Inc, Target Corp, Home Depot Inc, and Walmart Inc have developed enriched digital interfaces through their mobile applications creating user-friendly ecosystems that translate to dollars. With a combined workforce of 2.85 million people (1.6 million of which are Walmart Inc U.S. employees) to grow on top and bottom lines throughout 2020 and into 2021, it helps acknowledge the adaptability of even the largest companies.
During the market lows of March 2020, Lowe’s Companies Inc and Target Corp were underperforming Home Depot Inc and Walmart Inc. Post 2020 lows, shares of Lowe’s Companies Inc and Target Corp were performing better, breaking away from Home Depot Inc and Walmart Inc towards the end of 2020. Thus, as of August 23, 2021, Target Corp outperformed in a lovely turn of events, with Lowe’s Companies Inc in second, Home Depot Inc in third, and Walmart Inc lagging. Target Corp broke away from the group entirely after it reported impressive First Quarter Results in early May. Closer inspection reveals that shares of Walmart Inc were not as severely hit, rebounded much quicker than the other three, but could not sustain the early outperformance. Shares of Walmart Inc, a component of both the Standard and Poors 500 Index and Dow Jones Industrial Average, was underperforming the broader indices before market volatility in March 2020 as well. Since 2020, the Standard and Poors 500 Index and Dow Jones Industrial Average have returned about 37% and 22% as of August 23, 2021.
I wanted to focus on Walmart Inc a little more for two reasons. One, much like the “Everday Low Prices” it is so famous for, the stock currently has a low Price-to-Sales Ratio compared to the other three. Two, the Walmart Inc of 2021 or the Walmart Inc of 2030 or 2040 isn’t the retail store that Mr. Sam Walton started in Rogers, Arkansas, in 1962.
“Everyday Low” Price to Sales Ratio For Location Count
As of August 23, 2021, the trailing twelve-month revenues for Lowe’s Companies Inc, Target Corp, Home Depot Inc, and Walmart Inc were $147.18 billion, $125.36 billion, $350.07 billion, and $424.39 billion, respectively. Using the current market capitalization, the price-to-sales ratio for the companies registers as 1.49 for Lowe’s Companies Inc, 1.36 for Target Corp, 2.42 for Home Depot Inc, and 0.77 for Walmart Inc. Compared to the other three, Walmart Inc with its approximately 5300 U.S. Retail locations which include Supercenters, Neighborhood/Discount Stores and Sam’s Clubs is the cheapest.
Deduced from the 2020 Annual 10-K Report shared by the companies, the median number of Lowes, Home Depot, Target, and Walmart Supercenter locations across the US was 28, 26, 20, and 65. So, in essence, for every 1 Lowes/Home Depot/Target location, there were 2.32, 2.5, and 3.25 Walmart Supercenters alone. The following visual shows the combined retail location count for Lowe’s Companies Inc, Target Corp, Home Depot Inc, and Walmart Inc in descending order.
With 50% of 1077, 971, and 793 combined Lowe’s Companies Inc, Target Corp, Home Depot Inc, and Walmart Inc retail locations in the three most populous states Texas, California, and Florida, respectively, being Walmart Retail locations, the following is a breakdown of top-three states with total retail sites-
- Walmart Inc – Texas (602), Florida (385), and California (320)
- Target Corp – California (307), Texas (153), and Florida (126)
- Home Depot – California (232), Texas (180), and Florida (155)
- Lowes – Texas (142), Florida (127), and North Carolina (113)
Expanding beyond the United States, Walmart Inc had locations in Africa and Central America with countries like Lesotho, Swaziland, Costa Rica, and El Salvador through acquiring a majority stake in Massmart Holdings Ltd. and Walmart Centroamerica. Yes, the $16 billion investment in Flipkart, India’s e-commerce marketplace, is newsworthy. Still, India as a Geographic Market housed 29 Retail locations compared to 2,470 in Mexico, 855 in Central America, and 332 in Africa. With its 2470 locations, Mexico had more retail sites than Texas(602), Florida(385), California(320), North Carolina(216), Georgia(215), Illinois(191), Ohio(174), Pennsylvania(163), and Missouri(158) combined. Contrasting the Price-To-Sales ratio to Walmart Inc’s scale, I hope to argue that the stock is cheap compared to other companies.
Should an Increase in SNAP and Walmart Health Mean Anything?
On August 15, 2021, Ashraf Khalil and Josh Boak for the Associated Press reported that the USDA would “boost food stamp benefits by 25 percent,” from $121 to $157, and be “available indefinitely to all 42 million SNAP beneficiaries.” Moreover, in April 2019, a two-year pilot program called The SNAP Online Purchasing Pilot launched in New York, allowing participants to “select and pay for groceries online.” Eight retailers support the SNAP Online Purchasing Pilot Program- Amazon, Dash’s Market, Fresh Direct, Hy-Vee, Inc., Safeway, ShopRite, Walmart Stores Inc., and Wright’s Markets, Inc. The initial launch in New York enlisted the services of Walmart Stores to support SNAP participants in upstate New York as ShopRite and Amazon supported New York City. Increasingly, the retail experience is turning into a digital or omnichannel experience where customers, in this case, participants, are offered security, convenience, and sometimes delivery.
The increase in SNAP benefits combined with the convenience of omnichannel infrastructure should prove beneficial to America’s largest retailer. While Walmart Inc does not disclose how much it generates from SNAP benefits, it is easy to deduce that a significant percentage could be spent at Walmart stores literally littered across America. Portraying Walmart Inc as strictly a retail giant could be shortchanging what the company sees itself as because the specific experiments if executed excellently, should provide the ethos for Walmart as not “just a retailer.”
Finding a pharmacy or auto care center in your local Walmart store is common but, one state, in particular, offers a look at a changing Walmart Inc, looking to adapt and morph to maintain relevancy and do more.
Of the 5342 total U.S Retail locations, 3570 were Walmart supercenters. The peanut state, Georgia, recorded the third most Walmart supercenters at 154. However, what is interesting about Georgia is not peanuts but Walmart Health. 17 of the 20 Walmart Health Clinics are located in Georgia, and the experiment, i.e., Walmart Health, offers an idea of what Walmart could be in the future. Walmart Health Clinics are made in partnership with BLOX, makers of medical modules out of Alabama. Instead of displacing or affecting store processes, the infrastructure for these medical facilities is built elsewhere and then installed on-site in 60 days.
According to the Walmart Health FAQs, “Walmart launched Walmart Health to provide affordable, transparent pricing for key health center services for local customers, regardless of insurance status,” with services like Primary Care, Optometry, Dental, Counseling, X-Ray, Labs, Audiology, and Classes. Think of any primary care physician visit but made at your local Walmart store where the focus is on providing multi-level preventative healthcare supported with world-class equipment and medical staff.
In a press release from September 2020, Lori Flees, SVP and COO, Walmart U.S. Health & Wellness said, “with the size and strength of Walmart, we knew we could make a difference by providing quality, preventive health services at affordable, transparent prices for all who need it – regardless of insurance status.” A company with the size of Walmart Inc can, in my opinion, make a difference because of the sheer scale at which it operates. Combining the number of U.S. locations discussed earlier with another metric shared by Walmart Connect that “90% of Americans live within 10 miles of a Walmart store,” it should be clear that if Walmart decides to. Walmart Inc has consistently represented a company that serves the benefit of the U.S. consumer by providing the lowest prices. What started in 1962 with one store, one man, Mr. Sam Walton, and one mission: “help people save money so they could live better,” is now America’s largest employer and its biggest retailer.
The financial media often compare Walmart Inc and Amazon.com Inc (NASDAQ: AMZN) to identify and evaluate Retail trends. While Amazon.com Inc mostly makes its profits from its Cloud/AWS Revenue, Walmart Inc is not a technology-first company and relies on its omnichannel retail presence and operations to deliver results. Moreover, Walmart operates various segments with a global footprint where the infusion of technology and its expertise can derive efficiency and unlock further potential. Yes, Walmart Inc has not delivered the record-breaking performance for the last ten years; when you compare it to its peers or Amazon or the indices, it is a part of the Standard and Poor’s 500 Index or the Dow Jones Industrial Average. What Walmart has achieved, though, is recent performance against the Standard and Poors 500 Dividend Aristocrats Index. This index tracks the performance of companies like Lowe’s Companies Inc, Target Corp, McDonald’s Corp (NYSE: MCD), Caterpillar Inc (NYSE: CAT), and others that have “increased dividends every year for the last 25 consecutive years.” The following visual compares Walmart Inc, Lowe’s Companies Inc, and Target Corp, 3 out of the 65 Dividend Aristocrats, measured against the ProShares S&P 500 Dividend Aristocrats ETF (NOBL).
Much like the previous price comparison, Lowe’s Companies Inc and, Target Corp have broken away to set new records while Walmart Inc has become range-bound. Noticeable, though again, is the relative strength in Walmart Inc during the market volatility of March 2020. So yes, Walmart Inc might not deliver the share price performance provided by the Tech stocks of the early 21st century. But what Walmart Inc does have is a moat. A moat built on a brand of delivering low prices to consumers, an expansive footprint, with a potentially revolutionary storefront concept offering more than just stuff. Even with so many retailers present for the U.S. consumer to engage with, Walmart Inc has average Net Sales of $136.65 billion in the last ten quarters alone. When it comes to value stock, it is hard not to put Walmart Inc in that box.
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