Walmart Inc. (NYSE: WMT) shares are up 27% in the past year, compared to the S&P 500’s jump of 19%. But should America’s biggest retailer be compared to the index? Probably not. A better choice for its performance is how it has done against Amazon.com Inc. (NASDAQ: AMZN) and Costco Wholesale Corp. (NASDAQ: COST), its primary rivals. Amazon’s stock is higher by 73% this year, and Costco’s is up 44%. These are 10 stores like Walmart.
Walmart’s revenue rose 6% last year to $648 billion, and earnings rose 34% to $5.76 per share. This was a solid but unspectacular performance. However, it should have done better in a sharply improved national economy. Walmart maintains several advantages over the competition. It has often been said that 90% of Americans live within 10 miles of a Walmart location, although that is hard to prove. No brick-and-mortar retailer can touch so much of the U.S. population.
Costco operates in a fiscal year that is different from Walmart. Its most recent measure of performance is the 24 weeks that ended on February 18. Compared to the same period a year ago, revenue rose 7% to $116 billion. Per-share earnings were up 18% to $7.51. Those results don’t compare favorably to Walmart’s. There is no ready answer about why Wall Street likes the Costco model, which requires shoppers to be members for $60 a year. That would seem to be a modest distinction. On paper, however, it should create a level of customer loyalty.
Amazon remains light years ahead of Walmart as a retailer, at least as far as investors are concerned. Some shareholders argue that’s because Amazon owns the huge cloud computing company AWS, which brought in $90 billion last year, on which it had $25 billion in operating income. However, that ignores the fact that Amazon’s massive North American retail business had revenue of $353 billion last year, up 12%. And its operating income rose from a loss of $3 billion to a profit of $15 billion. Amazon’s reach and margins are the envy of the big retail sector.
Walmart has done well among America’s huge retailers, but rivals have done better (in Wall Street’s view).
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