Anemic job growth, declining wages and dwindling savings are making it difficult for average consumers to survive. Fortunately, they are finding solace at Walmart (NYSE:WMT) stock.
Last month the retail king reported first-quarter sales jumped 6% to $161 billion generating $5.1 billion in profits. The combination of everyday low prices and broad selection make it easy for consumers to shop its stores.
Walmart stock was even more impressive. Shares are up 28% in 2024 and the company is valued at $541 billion. It raises the question, can this retail behemoth become the next trillion-dollar stock?
A Closer Look at Walmart Stock
There is no understating the remarkable growth Walmart’s business is witnessing. Across all lines, it is seeing sales expand. Same-store sales rose 3.8% at the Walmart banner while jumping 4.4% at Sam’s Club in the first quarter.
The retailer is also gaining on Amazon (NASDAQ:AMZN) for online shopping dollars. E-commerce sales surged 21% globally and were 22% higher in the U.S. It is the eighth straight quarter of double-digit e-commerce growth.
CFO John David Rainey said in a statement, “Our strong results this quarter clearly demonstrate the power of our global omnichannel retail capabilities and the team’s ability to execute with discipline.”
That was fueled by the success of a road map Walmart laid out years before to use its local supercenters as fulfillments centers for pickup and delivery.
According to CEO Doug McMillan, “The progress that we’re seeing now is driven by the in-store remodels and in e-commerce.”
Remarkably, though, online delivery orders surpassed in-store pickup for the first time this quarter.
Making Shopping Better
McMillon told analysts Walmart’s performance was not just “inflation-driven results.” Year-over-year comparisons to inflation results indicate only 40 basis points of improvement came because of higher prices.
Instead, he says, “The momentum we see across the business is driven by growth in units sold and transaction counts, as well as market share gains, including general merchandise.”
Walmart is also growing its marketplace for third-party sellers. Their numbers increased 38% in the U.S. and were up a whopping 50% in Mexico (the marketplace is only available in North America).
Even better was the growth Walmart achieved in its advertising business, which saw a 24% gain in revenue. The retailer brought in $3.4 billion in ad sales last year.
Ad growth is coming from marketplace sellers, sales from which jumped 50% year-over-year while overall active ad accounts rose 19%. Sam’s Club now has 30% more advertisers than it did a year ago.
It makes sense: Walmart is providing marketers with a captive audience looking to spend money in its stores. Rather than the scattershot approach other platforms provide, Walmart closed ecosystem telegraphs to advertisers where consumers want to spend their money.
The Trillion-Dollar Opportunity
What does that mean for Walmart’s stock? Can it become worth $1 trillion? That seems a tall order. Although it’s already half way there, it took Walmart over 60 years to achieve that valuation. While it’s not likely to take Walmart another six decades, it won’t be happening soon.
The retailer is a massive, mature company. It has 1.6 million employees and $660 billion in annual sales. Walmart only targets 4% annual sales growth, so the first quarter put it ahead.
Yet doubling in size is like a battleship at sea trying to turn. It only makes long, sweeping curves, not quick zigzags through the water. Walmart becoming a trillion-dollar stock will happen but not for years yet. And that’s OK. In the meantime, Walmart stock is still a buy.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
