While many retailers were battered during the pandemic, big-box stores managed to thrive, and Walmart ( NYSE: WMT) was no exception. Being an essential retailer meant Walmart didn't face the same closure requirements as other stores, and Walmart's competitive price point has long served as a draw for consumers on a budget.
But Walmart's fourth-quarter earnings actually fell short of analysts' expectations. Though same-store sales in the U.S. grew by 8.6% and online sales grew a whopping 69%, Wall Street was hoping for better numbers. And now, a Walmart memo that was recently leaked highlights just how worried the big-box giant really is about its prospects.
Walmart's got competition
Though Walmart may be valued at a price point $20 billion higher than it was a year ago, the retail giant still has some pressing concerns -- mostly related to competition from online giants like Amazon (NASDAQ: AMZN) as well pressure from Instacart on the grocery front. Fellow big-box retailer Target (NYSE: TGT) is also taking a lot of business away from Walmart, and that trend could continue as Target continues to open more in-store shops that draw in customers.
Walmart has long been a leader in the online grocery market game, due largely to its popular curbside pickup service at its supercenters. But many other retailers have upped their game in that regard in response to the pandemic, and last year, Walmart struggled to keep up with customer demand when fears kept many consumers out of supermarkets. During that time, Instacart took a lot of business away from Walmart -- and that may continue to be the case even as coronavirus concerns ease up.
Another challenge Walmart is facing stems from its Walmart+ service -- a service that includes unlimited grocery delivery and other perks, like discounts at Walmart gas stations. Notably, Walmart isn't happy with its Walmart+ renewal rates or the number of free trial enrollees who convert to paid subscribers. The retail giant is also not thrilled with the fact that Walmart+ subscribers aren't spending money on general merchandise in conjunction with buying groceries, which tend to have a lower markup.
What does the future hold for Walmart?
Walmart currently serves as a major shopping center anchor, and commercial landlords rely on the retail giant as a steady source of rental income. Losing Walmart as a tenant would be downright catastrophic, especially at a time when so many retailers have bitten the dust.
The good news, however, is that Walmart is still a major leader in the retail space, and while it may be facing its share of challenges, it's hardly in danger of folding. Not only does the big-box giant have brand recognition going for it, but it's also done its part to adapt to evolving consumer needs. Case in point -- it recently launched its own health supercenters to give customers better access to care.
That said, in the coming years, Walmart will likely continue to feel the pressure as Target keeps getting stronger and Amazon further expands into the grocery business. While there may come a point when Walmart is no longer the leading retailer it is today, it will likely remain a shopping center mainstay for many years to come.