Walmart’s very good year

Gregory Meyer (0:31)

Pushkin.

Rob Armstrong (0:31)

I am Rob Armstrong. Coming to you from Unhedged World Headquarters in beautiful and sunny New York City. And I am joined today by Greg Meyer, who is the FT's, is it Retail Correspondent? What do we call you?

Gregory Meyer (0:47)

US. Consumer Editor.

Rob Armstrong (0:48)

US. Consumer, that's very grand, Greg.

Gregory Meyer (0:51)

Very. I strive for grandness.

Rob Armstrong (0:55)

So why is Walmart doing so well, Greg? And what can we kind of learn from that about the state of the American consumer?

Gregory Meyer (1:06)

Superlatives really are necessary to discuss Walmart.

Rob Armstrong (1:09)

Yeah.

Gregory Meyer (1:09)

Walmart is the largest US retailer. They're the world's largest retailer. They're the world's largest company by revenue.

Rob Armstrong (1:16)

I was looking at that number this morning, and it's like one company, $680-odd billion of sales every year. It's just staggering.

Gregory Meyer (1:26)

Well, last year. And it's growing by 4-5% a year. But 4-5% for Walmart is like more than the total revenue of most of their competitors. They're the largest private sector employer in America with 1.6 million employees here, 2.1 million employees worldwide. They account for 25% of groceries sold in the US. And if you live here in New York City, it's maybe easy to miss the fact that they're really everywhere.

Rob Armstrong (1:57)

But you don't have to go far.

Gregory Meyer (1:58)

They don't have to go far. Three miles outside the Lincoln Tunnel, there's a Walmart in Sikakis, New Jersey, right next to a Sam's Club, which was their membership warehouse.

Rob Armstrong (2:05)

And tell me this, will Walmart deliver to me?

Gregory Meyer (2:09)

I don't know the answer to that question. I'm going to try that when I get home. I'm almost certain you can. Whether you can get groceries delivered at home, I'm not sure.

Rob Armstrong (2:16)

Yeah, correct.

Gregory Meyer (2:16)

And one of the things that we can talk about is, one of the successes is that they can bundle together your broccoli with your flat-screen TV and deliver it to your house. But your question was, why has Walmart been doing so well in the past year? They've been growing revenues, as we discussed. They have been growing profits faster than the revenues, about twice as fast. There are a few reasons. One is, since 2021-ish, you saw this wave of severe inflation, wash over, America, the strongest inflation since you were in my childhood.

Rob Armstrong (2:56)

And they were able to win in that environment.

Gregory Meyer (2:58)

They were. One of their mottos, one of their key values is what they call the everyday low price. They don't go for promotions. They don't put ads in the Sunday, what used to be the Sunday circular, saying, we're discounting these by, come in today and you come after the discount. Instead, they have a massive merchandising operation in Bentonville, Arkansas that is able to consistently negotiate the best prices for their scale from suppliers and give customers some faith that what they're getting is going to be on average the lowest price.

Rob Armstrong (3:30)

But this brings us to a very timely point. And I think we mentioned this on the show before, that in their last conference call, the CEO said, look, tariffs, prices are going to have to go up a little bit. That's only realistic. And as we were discussing before the show, this is a company that makes a 4% operating margin. So there's not a ton of wiggle room in their model to absorb the tariffs. But it was interesting to me that there was a limit to how much, how far they're going to go to have the lowest prices. When an exogenous factor like tariffs comes along, what did you make of that decision?

Gregory Meyer (4:09)

Yeah, I mean, the CEO Doug McMillan said on that earnings call on May 15th, he discussed the tariffs as they stood at that time. As you know, the US tariff levels in the countries that have been, the trading partners that are affected by them seem to change every hour and a half. But he said as they stood at the time, there's only so much margin they can absorb and that they feel they have multiple constituencies, one being their customer, but the other being Wall Street, and the third being what they call their associates, their 2.1 million employees.

Rob Armstrong (4:43)

Only so far you can push.

Gregory Meyer (4:45)

Only so far you can push. So as you know, a day or two later, President Trump put out a social media message.

Rob Armstrong (4:51)

Eat the tariffs.