Walmart (NYSE: WMT), the world's largest retailer, has also been the largest company in America since 2002, and it's kept that ranking ever since, except for a few years in between when it dropped from the No. 1 spot. And Walmart is still going strong. In 2021, Fortune reported the top five U.S. companies as follows:
- CVS Health
- UnitedHealth Group
Walmart's first-quarter 2021 earnings went way beyond Wall Street's estimates. Shares are currently $141.49. It seems Walmart is kicking it, especially in grocery sales and e-commerce. But will this success last?
Walmart executives attribute much of the spending its customers are doing to stimulus money given out during the COVID-19 pandemic. As the pandemic wanes and people have immunity from either having had COVID-19 or vaccination, shoppers are feeling more confident to return to Walmart stores to shop.
Walmart's chief financial officer, Brett Biggs, told CNBC that pent-up demand will further benefit this retailer. Customers bought groceries, puzzles, bicycles, and printers during the pandemic as they were staying home and exercising outside instead of in gyms. Now that people are taking off their masks, Biggs says Walmart's been selling a lot of another product now: teeth whitener.
The stats for the first quarter
Walmart's earnings per share after the fiscal first quarter ending April 30 were $1.69, beating an expected $1.21. Its revenue was $138.31 billion, topping analyst expectations of $131.97 billion. The company's U.S. same-store sales were up 6%, much higher than analyst predictions of 0.9%. The growth reflects an increase of spending per customer rather than more customers shopping at Walmart -- the average ticket item was up 9.5% as transactions declined by 3.2%.
Where Walmart was a year ago
When people were sheltering in place last May, they were largely shopping online for supplies at Amazon, but they were also shopping in large numbers at Walmart. In fact, e-commerce sales at Walmart rose a whopping 74% in May 2020, and people were spending 16% more than usual at the biggest retailer in America. Walmart was definitely one of the winners during the pandemic.
What happens when stimulus checks stop?
Walmart seems to have benefited in part from stimulus checks. Business Insider reports that the people who received stimulus checks and earned less than $50,000 a year spent 22% more than they did the prior year. Not surprisingly, Walmart CEO Doug McMillon wants the White House to approve more stimulus checks. But at what price to the economy as a whole? Is throwing money at an economic crisis the way to help an ailing economy?
Finance professor Jonathan Parker, while writing of the 2008 stimulus checks, says, "While [cash payments] seem to be a reasonably effective way to get people to spend money now rather than later, the other foot hasn't dropped yet." He goes on to say that if higher taxes are necessary (the other foot), that will "ultimately slow the economy."
The Millionacres bottom line
Walmart has been on top for many years. And it's likely to remain on top for the foreseeable future. But Walmart has Amazon (NASDAQ: AMZN) to contend with, and stimulus checks, rescue plans, and relief packages -- which fuel Walmart's growth in part -- probably won't last forever. While Walmart is riding high for now, commercial real estate investors should watch this one.