Walmart Lets Down Investors

By Douglas A. McIntyre Updated Apr 8, 7:11AM EDT · Published Apr 6, 8:07AM EDT

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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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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.