Wal-Mart Stores is an irresistible (or at least unavoidable) retail force that has yet to meet any immovable objects. The world's largest company by revenue and bigger than Europe's Carrefour, Metro AG, and Tesco combined, Walmart is the world's #1 retailer with more than 2.3 million employees. In the US, Wal-Mart operates more than 5,300 stores, including about 4,570 Wal-Mart stores and 655 Sam's Club warehouses, and a growing number of smaller format stores. The company's faster growing international division (26% of sales) numbers more than 6,100 locations; Wal-Mart is the #1 retailer in Canada and Mexico and has operations in Asia (where it owns a 95% stake in Japanese retailer SEIYU), Africa, Europe, and Latin America.
The company operates in three segments: Walmart US, Walmart International, and Sam's Club. The Walmart US segment encompasses the company's Wal-Mart stores in the US as well as the walmart.com website; it's the largest segment, representing 62% of sales. International operations (some 26% of sales) includes all stores outside the US and various online retail sites. Sam's Club, representing 12% of sales, operates warehouse membership clubs in the US and the samsclub.com website.
The retailer also operates a dwindling number of discount stores, many of which are being enlarged to become Supercenters. Discount stores range in size from 30,000 sq. ft. to 206,000 sq. ft., while Supercenters range from 69,000 sq. ft. to 260,000 sq. ft. (with an average of 178,000 sq. ft.). Sam's Club warehouse centers average 134,000 sq. ft. of space. Smaller formats include Neighborhood Markets in the US (averaging 40,000 sq. ft.) and supermarkets and bodegas in Mexico. The International division operates a diverse portfolio with about 63 banners, representing three major categories: retail, wholesale, and other (which includes restaurants in Chile, Japan, and Mexico). Its biggest international subsidiaries include Asda, one of the UK's 'big four' supermarkets; majority-owned Massmart of South Africa, which has stores in 13 countries in sub-Saharan Africa; and Japan's Seiyu GK.
The retail giant's online incarnation, Walmart.com, offers more than 1,000,000 products. The e-tailer is expanding by offering merchandise from other retailers at its new virtual mall called Walmart Marketplace. The virtual mall offers apparel, baby, home, and sporting goods items from other sellers in return for a share of the revenue.
Some 260 million customers visit Wal-Mart's stores and websites each week.
Wal-Mart rings up more than 70% of its sales in the US. In the 20 years since the Arkansas-based retailer entered Mexico (its first and largest foreign market), Wal-Mart has become an international retail powerhouse with operations in 27 countries. Of its 11,000-plus stores, more than half are located outside of the US. Indeed, Walmart International is the company's growth engine, accounting for 26% of sales. In addition to Mexico, major foreign markets include Africa, Argentina, Brazil, Canada, Central America, Chile, China, India, Japan, and the UK.
Sales and Marketing
Wal-Mart spent $2.5 billion on advertising in fiscal 2016 (ended January), up on $2.4 billion in fiscal 2015 and 2014. Its advertising consists primarily of print, television, and online ads.
The Wal-Mart US segment operates 137 distribution facilities including return facilities and 13 e-commerce fulfillment centers; the Sam's Club segment operates 24 distribution facilities. The company also has 176 international distribution facilities.
Revenue fell 1% in 2016 to $482.1 billion, following five years of steady revenue growth up to 2015. A decrease in the company's international operations was the main factor, as well as unfavorable international currency movements and the low global oil price affecting Sam's Club fuel sales.
Net income decreased 10% in 2016 on prior year, coming in at $14.7 billion, as a result of lower net sales. Cash from operating activities fell 4% to $27.4 billion for the same reason.
The company's growth strategy for its international business includes acquiring new stores and striking up alliances to enter new markets. Wal-Mart is also investing in growing its e-commerce and mobile channels.
Wal-Mart closed 154 stores in the US January 2016, the first tranche of a total 269 planned closures and the first instance of mass store closures in the company's history. The January closures included all of its 102 Wal-Mart Express stores, the company's smallest store format and one that was only introduced in 2011, as part of push to pare back unprofitable or loss-making stores. It also closed 60 underperforming stores in Brazil, representing 5% of the company's revenue in the geography. The closures in total represent less than 1% of square footage and revenue.
Despite the closures, Wal-Mart nevertheless intends to stick to plans introduced by the company's new head of its US stores division and open around 400 stores, mostly Supercenters and Neighborhood Markets, in 2016.
Among the many measures the company has taken to get its groove back at home (besides the store closures and Wal-Mart's sunny new logo), was a restructuring of its US organization (including top executive changes), the formation of a new division to oversee global e-commerce (called Walmart Global eCommerce), and a new global sourcing partnership with Hong Kong-based Li & Fung. Under the terms of the deal, Li & Fung -- a provider of supply chain services -- will form a new company to manage the Wal-Mart account and will act as the company's buying agent. The reorganization in the US entails the formation of three geographic business units: Walmart West, Walmart South, and Walmart North, in an attempt to more efficiently manage its domestic stores. While the retail operation was carved into three geographic slices, the logistics, real estate, and store operations functions were consolidated under one leadership team.
With US suburbs saturated with Wal-Mart stores, the retailer has tried -- mostly unsuccessfully -- to gain access to urban markets. Wal-Mart scored a significant breakthrough in its plan to build stores in US cities when it teamed up with Michelle Obama (in 2011) to launch its five-year plan to provide its customers with healthier, more affordable foods. Wal-Mart has reformulated its Great Value private label line of foods to reduce sodium, fats, and added sugars (and encourage its major suppliers to follow suit). Concurrently, with the first lady's support, it announced a commitment to building stores in underserved communities (aka "food deserts").
The company opened, relocated, or expanded 216 new Sam's Club stores in fiscal 2015; and announced plans to open 9 to 12 new and relocated clubs, and remodel at least 55 clubs, while investing in innovation at SamsClub.com.
Given the breakneck pace of its international expansion over the past two decades and the growing importance of the international business to Wal-Mart's overall financial health, the fact that its Mexican subsidiary, Wal-Mart de México, is the subject of a bribery scandal is a serious blow to the company and its leadership. Mexico is Wal-Mart's largest foreign market and home to more than 2,000 of its supercenters, Sam's Clubs warehouse stores, and numerous other retail formats. Further south, Wal-Mart is growing quickly in numerous other countries in Latin America, including Chile and Brazil. E-commerce sales are also rapidly growing in China and Brazil.
Asia (excluding Japan) is another hot growth market for Wal-Mart. Through joint ventures the company operates 411 stores in China. To support its growth in the country, Wal-Mart is building its Asian headquarters in the coastal city of Shenzhen, the site of its first supercenter and Sam's Club in China. And in a move that demonstrates how important the vast Chinese market is to the world's largest retailer, staunchly anti-union Wal-Mart has announced that it will work with officials there to establish labor unions in all Wal-Mart stores in China. Wal-Mart is also poised to enter India's huge but fragmented market via a joint venture with the Bharti Enterprises. (Regulations in India prohibit retailers like Wal-Mart from selling directly to consumers, but allow them to engage in wholesale cash-and-carry and back-end supply chain management operations in the country.) Wal-Mart expects to have 50 wholesale stores operational in India by 2019.
The company is also making efforts towards sustainability, with an end goal of using 100% renewable energy. In 2014 it announced that it would install up to 400 new solar projects across the US by 2018.
Following the death of Helen Robson Walton in 2007, the Walton family announced that much of the Wal-Mart stock held by Mrs. Walton through a family partnership will be donated to charity over several years. As a result, the Walton family's grip on the world's largest retailer will slip from about 50% (as of April 2013) to about 33%, following the disposition of Mrs. Walton's stake.