Walmart’s push to squeeze more profit out of its fast-growing online and advertising businesses could lift earnings over the next five years.
Walmart’s e-commerce arm in the U.S. still loses money, but automation in warehouses and denser delivery routes could turn it profitable by the end of the decade. That shift could meaningfully lift margins for the company’s biggest market.
"We estimate that WMT US e-commerce has an EBIT margin of -6.7% on a fully loaded, unsubsidized basis. By automating fulfillment and densifying delivery routes, we see a path to profitability on an unsubsidized basis by FY2030," analysts at Bernstein said.
Advertising is another opportunity. Walmart’s retail media business, which lets brands pay to reach shoppers on its platforms, is small compared with Amazon’s.
Today ads account for about 3% of the value of goods sold through Walmart’s U.S. sites, while Amazon runs closer to 7%.
If Walmart can push its share of ad sales to 5% as online sales double to more than $200 billion, advertising revenue could climb from $3 billion to $10 billion and add further margin gains, as per Bernstein.
Together, the improvements in e-commerce and retail media could lift U.S. profit margins to around 7%.
That would add more than a dollar per share in earnings over five years, according to analysts.
Walmart also has a large investment in India through Flipkart and PhonePe. Both businesses are around breakeven, but if they go public, Walmart could unlock value by selling part of its stake and using the proceeds for share buybacks. That could add another small boost to earnings.
Source :
https://www.investing.com/news/stock-market-news/here-is-a-deeper-look-at-walmarts-earnings-power-upside-4237519
