Retail giant Wal-Mart Stores, Inc. (NYSE:WMT) continues to maintain its profitability by opening new stores and expanding its reach outside of the U.S. However, is the company maintaining its growth solely by adding new stores? Does it also have organic growth — i.e., does its average store sell more? How is the company doing in terms of revenue growth and profits per store compared to other leading retailers? Let’s explore these issues.
To better understand Wal-Mart Stores, Inc. (NYSE:WMT)’s profit centers, I have divided the company’s three main operations into Wal-Mart U.S, Wal-Mart international and Sam’s Club. Let’s first examine the changes in the number of stores in each business segment.
Source: Wal-Mart’s quarterly earnings report.
As seen in the table above, the international segment grew the fastest in the past quarter — a 7.2% rise year over year. Conversely, Sam’s Club stores grew the slowest at 1.3%.
Now let’s turn to the company’s changes in sales and operating profit for each segment.
Source: Wal-Mart’s quarterly earnings report.
Wal-Mart Stores, Inc. (NYSE:WMT) U.S is the most profitable at 8%. Sam’s Club is the least profitable at 3.8%. Net sales grew in all segments, with Wal-Mart Stores, Inc. (NYSE:WMT) international leading the way slightly with a 2.9% gain.
Dividing the revenue and operating earnings by the number of stores in each segment, however, a different picture is revealed.
Source: Wal-Mart’s quarterly earnings report.
The table above shows the changes in revenue and operating profit per average store per segment.
Both Wal-Mart U.S and Wal-Mart International’s average revenues per store declined in the second quarter. Moreover, Wal-Mart International’s average operating profit per store tumbled by 7.9% during the quarter. Only Sam’s Club’s average revenue per store grew in the past quarter.
This means Wal-Mart Stores, Inc. (NYSE:WMT) hasn’t done well in the past quarter, as its earnings report might suggest. The rise in revenues in Wal-Mart’s U.S. and International segments was solely due to an increase in the number of stores. On average, stores have done worse in the second quarter compared to the same quarter in 2012.
How is the competition doing?
Let’s consider two other retail giants and see how they have done compared to Wal-Mart Stores, Inc. (NYSE:WMT). Costco Wholesale Corporation (NASDAQ:COST) has done much better than Wal-Mart in terms of revenue growth. The company’s net sales increased by 7.9% in the past quarter. After examining Costco Wholesale Corporation (NASDAQ:COST)’s growth in the number of stores, it seems the company has also done well in terms of growth in sales per store.
Source: Costco’s quarterly earnings report.
