![]() ![]() We get the next Walmart earnings report in mid-August '22. Since that time, there remains a little pressure on EPS estimates. ![]() ![]() The thick bordered area represents the EPS guide-down after the fiscal Q1 '23 earnings report. WMT EPS estimate revisions (IBES data by Refinitiv ) When you are essentially the largest retailer in the world, you have enormous power of your suppliers, as Michael Porter's Competitive Strategy teaches all B-school students.) Walmart's EPS And Revenue Estimate Revisions (David Faber of CNBC did a special on Walmart years ago and this issue came up. I'd imagine being a Walmart supplier, particularly a small one, is very tough since a retailer that size can dictate payment terms that are entirely to their own advantage, ("90 days or nothing") and suppliers have to live with it. Walmart's working capital has been negative since 2002. In fact, looking back at October '08, the Lehman bankruptcy and the plummeting stock market and US economy, in the October '08 quarter, Walmart still managed to generate $190 million in positive cash-flow. I've been modeling Walmart since the mid-1990's and there has never been a negative quarter of cash-flow from operations, let alone one that size, until April '22. Walmart's cash-flow from ops in Q1 '23 (ended April '22 and already reported) was a negative $3.7 billion and working capital was negative $13.1 billion. #2 is what I wanted to focus on with this article, since inventory and inventory turnover impact working capital and ultimately cash-flow-from operations. On the April '22 quarterly conference call, Doug McMillon noted the quarter's issues with three bullet points: Shown are the last 17 quarters of year-over-year "inventory growth vs sales growth" dating back to April '18.įor a company that runs like a Swiss watch, and generates some of the largest revenue growth in the S&P 500 ($576 billion in the trailing 4 quarters as of April '22), the fact that Walmart is having problems with inventory and levels of inventory relative to sales growth is really remarkable. Walmart's Inventory vs sales growth (earnings reports, 10-Q's )Ĭlick on this link to enlarge it so that it's legible. With Walmart, the model is "come in for grocery and leave with something else." Walgreens business model was the exact same concept for years, but with prescriptions driving foot traffic and the "convenience" end of the business driving margins. ![]() In my opinion, Walmart clearly has a sustainable competitive advantage in the grocery business, and it fits perfectly with their business model since it drives foot traffic, it's a lower-margin business (Walmart customers can walk in and get what they need for less than $20), all of this driving the ability of their customers to say, once they are in the store, "Well, I'm here now, maybe I can take a quick look for the new pair of slippers I need." When Jeff Bezos stepped down from his CEO position at Amazon, one of the parts of Amazon's business he said he wanted to focus on was Fresh and groceries, since the concept never really gained traction like the rest of the business. We bought new positions in Walmart ( NYSE: WMT) for the first time in many, many years recently, after the latest EPS blow-up and the drop in the stock from the $140's down to the low $120's.įor years, my thought process was (rightly or wrongly) that Walmart was at a structural disadvantage to ecommerce and in particular Amazon, but what gradually got me thinking otherwise was that Walmart - with grocery representing about half of total revenue - is the largest grocer in the world, (by far I would think) and Amazon Fresh and Amazon grocery were having a hard time making that aspect of ecommerce scalable. ![]()
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