Head over here to check it out:
^^^ This is where you want to go.
Some details of the release here.
Press release:
Earnings presentation/financials:
CNBC’s report:
Come back here for the recap.
What Does Walmart Earnings Mean For 2024 Planning?
Here are a few quick takeaways from Walmart’s earnings that have relevance for everyone.
1 - Deflation is in our future. Prices on general merchandise continue to come down, even as food inflation is somewhat persistent. On a two-year stack, food inflation is up ~15%.
How much of those declining costs are you going to book as margin is one question you will have to decide in 2024?
The answer might depend on how strong the consumer is. The “bullwhip effect” continues to whip. 
2 - Consumer Is Highly Promotional
Walmart discovered end of October that the consumer will wait for big purchases. Volume slowed down significantly second half of October, and they can’t attribute it to anything except the consumer waiting for discounts on big purchases.
If this continues, it’s a worrying trend that consumers are starting to get very comfortable with.
As always, here is your earnings recap:
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4.9% Walmart US comp sales growth y/y. Ironically, this is the opposite of Target just a day earlier who dealt with -4.9% comp sales growth. A tale of two retailers.
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Gross margin up 32bps
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US eCommerce up 24% y/y on the quarter, a strong result.
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Advertising up 20% globally, and 26% in the US (Walmart Connect)
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Operating income grew 22% y/y.
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General expenses are higher due to increased number of store remodels, and higher labor costs.
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20% increase in marketplace sellers.
For the supply chain fanatics:
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Walmart US increased the number of digital items shipped from stores by 800 bps y/y.
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Walmart’s spark driver platform lowered store-to-home delivery costs by 15%
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“Densifying the last mile” seemed to be a new word. The word densify enters the lexicon.
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Introduced their third next-generation eCommerce fulfillment facilities.
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In the micro-fulfillment world, there will be 7 stores live with MFCs by the end of the month. (this is automated fulifllment attached to stores)
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Walmart Fulfillment Services adoption up 55% y/y.
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I posed the following question in the live chat Rick was hosting while listening to the earning call.
Was there any mention of the remaining investment in Asda UK
The answer was no mention.
I have done some further digging, and the lack of information on this is, frankly, a bit worrying.
The agreed position in the 2018 era divestment (which took until early 2023 to completely close) was Walmart was retaining a 20% stake and a board seat, with Issa Bros & TDR buying the rest (subsequently Issa has been working to merge Asda into their EG [Euro Garages] Group business). I can’t find any information that indicates that 20% stake has be subsequently sold/transferred.
Given the sale of 80% was valued at £6.8 (if I read that correctly), then Walmart is holding onto a stake of around $2bn (there were significant legal and pension liabilities offsetting this, shown in the last annual report).
This stake is an financial asset, which might generate an income. Neither is broken out in recent financial results specifically (Q3 or last Q4), nor any change in values. Maybe not a major concern in the overall size of Walmart, but not insignificant either.
Very little information is being shown on Walmart’s corporate site (using the search feature with sensible keywords), and not seeing a lot of transparency from a quick look at Asda corporate site either (Asda now being a privately held business in the UK, it won’t be publishing as much detail that a UK or US public business would publish).
I have not ready everything on both corporate websites, so I may have missed something, but any significant should be more obvious.
Worth noting that Asda does have significant grocery and non-foods ecommerce in the UK (delivered to home and BOPIS), including operating BOPIS/BORIS as a service for other ecommerce operators. It also is a significant operator of pharmacy (in the main Asda stores) and fuel stations (mostly at main stores but a few standalone locations), and wholesaling groceries to the fuel stations operated by the EG group.
Contemporaneous background to the sale.
Wallmart originally wanted to sell to Sainsbury’s but this was prohibited by the UK Competions and markets authority (hello Albertsons/Kroger) clearing the way to sell to Issa
(Sainsbury’s at the time was led at the time by Mike Coupe, who slightly disgraced himself by singing “we’re in the money” after an interview when he thought the mike was off–and Mr. Coupe is now holding various non-exec board positions at various organisations including New Look.)
As I have frequently said: Certain kinds of ecommerce requires decent drop density in the last mile.
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No news is usually bad news in these types of situations. I’m sure there has been a revaluation/write-down.
Has there been any news of share loss or revenue decline?
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I haven’t read through recent Asda financial results but per 3rd party lists like Kantar, I seem to recall that Asda has dropped from No. 2 in UK grocery market share/grocery revenue to No. 3, exchanging places with Sainsbury’s who have been doing a bit better of late.
Since Asda is privately owned (as is Morrisons) there is less financial info available to compare, basic Companies House filings only. (Sainsbury’s has significant middle east sovereign wealth fund investment which allows some cover for longer term investment strategy.)
(Tesco of course is solidly No. 1, especially for grocery ecommerce, from memory an increasing battle for No. 4 between Morrisons, who haven’t been doing well, and Aldi/Lidl–jointly I think Aldi/Lidl are now No. 4, and both are near or above premium options like Waitrose and M&S.)
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Going down this rabbit hole a bit more.
Asda paid a cash dividend to the current financial holding company Bellis Finco. But no cash dividend to WalMart as part of that for holding a 20% stake? I can’t get an answer to that question.
Also, the Issa’s have used the financial vehicle that acquired Asda to take over their original company EG Group, to restructure their overall debts, reducing debt load by £300m (which pretty much covered to purchase of tranche of fuel stations from rival CoOp group).
And EG group has now also done a deal to take over the Tesla Supercharger network in the UK, which will all be rebranded.
(I’ll let you find the linkage for these transactions for yourselves, although this local newspaper to the Issa head office is one of the better summaries Billionaire Issa brothers sell to Asda for £2.27bn | Bradford Telegraph and Argus
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