Trending Assets
Top investors this month
Trending Assets
Top investors this month
What's the math behind Walmart's $9B in its stores?
CNBC recently reported on Walmart's plan to invest $9 billion in 1,400 stores in the US. These stores will have:
  • refreshed interiors and exteriors with new paint
  • updated flooring
  • modernized restrooms
  • LED-lighting
  • bigger pharmacies with private screening rooms for pharmacist consultations and services

  • digital screens and QR codes that offer information on Walmart’s services offered online

  • and new signage for brighter and easier navigation through the stores

The goal of these upgrades is to give customers more check-out options, including staffed lanes and self-checkout areas, and more grab-and-go food and beverage options in its grocery areas. Now, let's do hypothetical math to see the ROI of this investment.

Let's assume that each store gets $6.4 million in upgrades and the company has a 4% operating margin. We will use Walmart's FY22 US sales of $164 billion.

Conservatively, assuming these upgrades lead to 2% sales growth, on $164 billion, that would give Walmart $3.28 billion in revenue growth. When you take into account their thin operating margins, these upgrades would give Walmart $131 million in extra operating profit, represents a 1.46% ROI.

The article did mention that they tested these upgrades in a few concept stores and noted that one of the stores had 20% same-store sales growth. Using the optimistic case, assuming same-store sales were 15% instead of 20%, the upgrades would give Walmart $24.6 billion in revenue growth and $984 million in additional operating profit. This increases the ROI of the investment to 10.9%.

For the Walmart shareholders on this platform, what are your thoughts on this bold investment plan? Do you support it or not? What are your thoughts on the math that I've done to understand the ROI on this investment?
Walmart to upgrade 1,400 stores with $9 billion investment
U.S. retail chain plans to modernize more than 1,400 of its 4,717 Walmart stores across the country.

Already have an account?