Walmart makes huge change to its stock that people will love

Investors are cheering Walmart’s latest decision.

Feb 4, 2024 - 00:30

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Walmart makes huge change to its stock that people will love

Walmart is a retailing titan, but it wasn’t always. It took decades for Walmart to expand nationwide and become the largest retail store in the country. Today, 90% of people in the U.S. can easily hop into their vehicle or take public transportation to a Walmart store.

It isn’t just easy access that's made Walmart beloved by many. Its decision to start selling groceries in 1988 turned it into a one-stop destination for customers, and its low-priced focus keeps shoppers coming back frequently.

The company’s success has been good for shoppers and for those who invested in Walmart stock.

Over the years, many, including Walmart workers who invested money in the company, have become wealthy by owning Walmart shares. The company's stock began trading in 1970 when Walmart was worth about $5 million. Today, Walmart’s stock price is nearly $170, and its market capitalization has soared to $456 billion.

The good times may not be over. Walmart recently made a choice that will impact all of its shareholders and, perhaps, make it easier for those who don’t yet own its shares to buy.

Walmart shares have made many wealthy since its IPO in 1970.
Image source: Walmart.

Walmart is a retail Goliath, outpacing rivals, including Amazon

You might think that Amazon, the company responsible for putting online shopping on the map, is the biggest retailer in America. It’s not. Walmart (WMT) - Get Free Report remains the titan, racking up hundreds of billions of dollars in revenue annually.

For example, last fall, Walmart reported revenue of $161 billion in the three months ending October, up 5% from the prior year. Despite rock-bottom prices, it also remains highly profitable, producing $1.53 in earnings per share in the quarter.

That outpaced Amazon’s (AMZN) - Get Free Report revenue by tens of billions of dollars. In the third quarter, Amazon's revenue totaled $143 billion, and its earnings were $0.94 per share.

The gap between the two, however, is bigger than that.

While Walmart’s sales and profit come mostly from retail sales, Amazon gets a big chunk of its revenue by renting out spare capacity on its computer servers. Its Amazon Web Services, which offers cloud network solutions, hauled in $23 billion during Q3, accounting for 16% of its revenue.

Walmart is also handily larger than rival Target (TGT) - Get Free Report. Target’s nearly 2,000 locations “only” generated $25 billion in revenue in the three months ending October. That’s not chump change, but it’s certainly nowhere near Walmart’s haul.

Walmart stock gets a boost

Walmart won’t release its holiday quarter revenue and profit figures until Feb. 20, but it did reward investors with some good news recently.

The company decided to split its shares, giving shareholders who own Walmart stock as of Feb. 22 three shares for every one share they own.

More Retail:

The 3:1 stock split won’t increase the total value of Walmart stock. However, it will reduce Walmart’s stock price, potentially allowing more people to buy more shares.

Here’s how it works: If a person owns ten shares on Feb. 22 at a hypothetical price of $170 per share (worth $1,700), they will end up owning 30 shares after the close on Feb. 23 at a stock price of about $56.67 per share (worth $1,700).

The total value of the shares will be the same. Nevertheless, the lower share price may make Walmart more investible for many smaller investors, including its workers.

Walmart says the split will help “associates take advantage of long-standing stock purchase benefits.” It also said, “The stock split is part of Walmart’s ongoing review of optimal trading and spread levels and its desire for its associates to feel that purchasing shares is easily within reach.”

Over 400,000 Walmart workers participate in its Walmart Associate Stock Purchase Plan, which allows workers to buy stock through payroll deductions. Walmart also provides a 15% company match on the first $1,800 workers invest annually.

Walmart will also grant store managers up to $20,000 of yearly stock grants.

The decision builds upon a long history of encouraging workers to own a stake in the retailer. Sam Walton, Walmart's founder, once said, "Those who bought in that [initial public offering], or who owned some of those early partnerships and had them converted in that offering, made an absolute killing."

He wasn't kidding.

According to the Walmart Museum, Walmart stock has split two-for-one 11 times since its first offering on October 1, 1970, at $16.50 per share; somebody who bought 100 shares in 1970 would own 204,800 shares. That would be worth about $35 million at current prices.

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