How Walmart Makes Money

Walmart Inc. (WMT) operates a worldwide network of retail stores as well as an e-commerce business. The company is known for its "everyday low prices" strategy in selling a wide variety of merchandise, including home goods, apparel, electronics, food, and more. The company operates in 24 countries, with roughly 10,500 stores and clubs under 46 banners as well as e-commerce sites. It employs more than 2.3 million people, with the large majority of employees based in the U.S.

Walmart's competitors include both traditional retailers such as Target Corp. (TGT) and e-commerce businesses like Amazon.com Inc. (AMZN).

Walmart's Financials

Walmart announced in mid-February financial results for Q4 of its 2022 fiscal year (FY), the three-month period ended Jan. 31, 2022. The company posted net income attributable to its shareholders of $3.6 billion, a significant turnaround from the $2.1 billion net loss reported in the year-ago quarter. Revenue rose 0.5% year over year (YOY). Operating income, which Walmart uses as a profitability metric for its individual business segments, rose 7.3% YOY to $5.9 billion.

Walmart said that its revenue for the quarter was negatively impacted by $10.2 billion due to divestitures of certain business operations. But the company noted that its Walmart stores in the U.S. gained market share in grocery. Its e-commerce sales rose 1% YOY and 70% compared to the same three-month period two years ago.

Walmart's Business Segments

Walmart divides its operations into three reportable segments: Walmart U.S., Walmart International, and Sam's Club. The first two of these segments represent Walmart-branded stores and products on a geographical basis, while the third represents the Sam's Club warehouse store.

Walmart only provides segment profits measured by operating income, which is a profit metric that excludes several expenses, such as taxes and interest on loans, that are included in overall profit, called net income. As mentioned above, Walmart reported operating income for Q4 FY 2022 of $5.9 billion, which includes a loss of $677 million attributed to "corporate and support."

Besides the three segments represented below, Walmart also reported $1.3 billion of revenue for Q4 FY 2022 under the category "membership and other income."

Walmart U.S.

Walmart U.S. is by far the largest of the company's segments. It represents Walmart stores in the U.S., including Washington D.C. and Puerto Rico. This segment includes both "Walmart" and "Walmart Neighborhood Market" stores, as well as multiple e-commerce brands.

Walmart U.S. reported operating income of $5.2 billion on $105.3 billion in net sales in Q4 FY 2022. This represents 79% of the company's operating income and 69% of its net sales for the quarter. Walmart's U.S. operating income increased by 0.3% YOY in Q4 FY 2022. Net sales increased 5.7% YOY.

Walmart International

Walmart International includes Walmart's operations outside of the U.S. The company has wholly-owned subsidiaries in Africa, Asia, Central America, and elsewhere around the world. Walmart International includes supercenters, supermarkets, hypermarkets, warehouse clubs, and e-commerce sites.

Walmart International reported an operating income of $832 million on net sales of $27.0 billion for Q4 FY 2022. This represents 13% of the company's operating income and 18% of its net sales for the quarter. Walmart International's operating income decreased 13.7% YOY for Q4 FY 2022, the only segment to post a YOY decline in this area. Net sales fell 22.6% YOY.

Sam's Club

Sam's Club is a membership-only warehouse club that operates across most of the U.S. Unlike the other two segments, membership income is a major contributor to this segment's operating income. Sam's Club also includes e-commerce sales through samsclub.com.

Sam's Club reported an operating income of $549 million on net sales of $19.2 billion for Q4 FY 2022. This represents 8% of the company's operating income and 13% of its net sales for the quarter. Sam's Club operating income grew by 41.1% YOY and net sales climbed by 16.5% YOY for Q4 FY 2022. This represented the fastest net sales growth of any Walmart segment.

Walmart's Recent Developments

On Feb. 17, 2022, Walmart announced that its board of directors had approved an annual cash dividend for FY 2023 of $2.24 per share, representing an approximately 2% increase from the previous year's dividend. The annual dividend is set to be paid in four quarterly installments of $0.56 per share.