Walmart(Nyse: wmt) He is one of the largest and most powerful merchants in the world. Currently, it works pretty well, and the fiscal quarter of the 2025 quarter of 2025 has increased 4.6%for sales in the same store.
However, there is wrinkles in this issue, as it is supported by customers who do not usually buy at Walmart. Here’s why this is a problem.
Walmart is a merchant, but it doesn’t even start dealing with a huge scale of company, which has $ 790 billion cap. It is a dominant force in a general retail, in foods, in club stores and in an online retail arena.
The company generated huge $ 462 billion revenue revenues only in a fiscal 2025. It’s hard to handle how important it is retail sector.
Picture source: Getty Images.
Accordingly, Walmart’s bread and butter always offered products at attractive prices. One of the tags of the company is “daily low prices”.
Everyone likes a favorable, but the basic buyer of the company is a lower down a socioeconomic spectrum. It is not inherently bad, but it is important to remember that Walmart does not target households with upper revenue.
Currently, Walmart is going well, financially speaking. In the fourth quarter of the Fiscal 2025, sales increased by 5% compared to the US market, the most important company region. The quarter included all the important holiday season, so it was a rather impressive view. Sales in the same store (KOMPS) increased by 4.6%, with increasing traffic of 2.8%and increasing the average ticket size by 1.8%.
Basically, more people bought in Walmart and spent more every time they visited. This is exactly what you want to hear if you are an investor in retail stock. In the meantime, meanwhile, it has been sale with 4.7%and growth of 4.5%. So fiscal 2025 was a good year that ended with a strong note. Just one thing is wrong.
When explaining the success of US business, the administration said “Profit of the stake [came] Primarily from households with upper income. “So an important part of that success was from customers who were traded in trade in the company stores. That talks about two problems.
First, if households with the upper income decide to buy at Walmart, it suggests that the economy is not great for consumers. So, the basic buyer of the chain may be currently fighting, the fact that the increase in shopping customers could be darkened. Although it is positive that it can currently benefit from this non-excellent group, it is not a good sign for a business background that the chain is facing today.
Second, Walmar’s basic customers are not really in the category of upper revenue; They are the customers of medium and lower incomes who need daily low prices literally every day. Upper income buyers are very likely to trade backups when they feel more financially safer.
This means that the benefit of households with upper income is likely to be temporary. And if they get stake in retail, they come primarily from households with higher income, as the administration says, what will happen when your customers leave?
Household focus with upper income, it may feel like a small problem to complain about. Indeed, Walmart is going well, and for now it is good news that they can serve these customers who are involved in trade.
But the shares are traded within 10% of their all time. And the ratios of prices and sales and prices and earnings are above their five -year average. Dividend yield, 1% or more, is located near the low end of the historic range. The stocks look expensive.
You could claim that since now it goes well, it deserves a premium price. Fair enough, but it also seems that many good news prices in stock. If anything goes wrong, such as customers with an upper income transferred back to a higher -class shop, Walmar’s results could look less attractive.
And the supplies, which prices in the premium, could fall quickly. If your assessment is important, you will probably want to avoid Walmart immediately.
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Reuben Gregg Brewer There is no position in any of the shares mentioned. Motley Fool has positions and recommends Walmart. Motley Fool has disclosure rules.
