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Walmart’s costs and expenses in fiscal 2019, 2020 and 2021

Walmart (NYSE: WMT) is the largest physical retailer based in the United States. The company has achieved enormous growth consistently over the past several years. However, consumer preferences have kept changing in recent years. A larger number of people are now buying products online. The pandemic has accelerated the move towards digital in the retail industry. Walmart has been investing in digitalization over the past few years. It has also grown its share in the US e-commerce market through a consistent focus on digitalization and customer experience. Walmart’s competitive moat lies in its large selection of products and its consistently lower prices. They continue to attract customers.

While Amazon has emerged as a significant threat for the other retail brands based in the United States, Walmart’s financial growth over the past several years demonstrates that the company has a deeper competitive advantage than most retailers in the US. Since the acquisition of Flipkart, Walmart has been consistently growing its focus on e-commerce in the US and abroad. As of Jan 2019, Walmart had a total of 11,501 stores operational across the globe. Its net revenues surged to $523.9 billion in 2019, and its net operating income was $20.6 billion. It shows that the company also incurs huge costs to run its business successfully worldwide. While the cost of sales is one major category of Walmart’s expenses that sells a vast selection of products at very low costs to its customers in the US and other markets, there are many other significant expenses associated with Walmart’s global operations. Over the past several years, the company has successfully maintained a higher than 24% gross profit margin.

Walmart’s Cost of sales:

Walmart’s largest group of expenses are its cost of sales. Apart from the cost of products Walmart sources from its suppliers, there are other costs too included in the cost of sales. However, the cost of goods is the largest category of cost included in the cost of sales. Apart from the actual product cost, it includes the cost of transportation to the Company’s distribution facilities, stores, and clubs from suppliers, the cost of transportation from the Company’s distribution facilities to the stores, clubs, and customers, and the cost of warehousing for Sam’s Club segment and import distribution centers.

According to the annual report of the company for fiscal 2020 (fiscal year at Walmart ends January 31. Fiscal 2021 at Walmart began February 1st 2020.), the cost of sales equaled $394.6 billion compared to $385.3 billion in fiscal 2019 and $373.4 billion in fiscal 2018.

The table below shows Walmart’s quarterly cost of sales from fiscal 2019 to fiscal 2021.

Year/QuarterCost of sales (Millions)
2019 Q1$91,707
2019 Q2$95,571
2019 Q3$93,116
2019 Q4$104,907
2019 Total$385,301
2020 Q1$93,034
2020 Q2$97,923
2020 Q3$95,900
2020 Q4$107,748
2020 Total$394,605
2021 Q1$102,026
2021 Q2$102,689
2021 H1$204,715

Walmart’s cost of sales is generally the highest during the fourth quarter of the fiscal year, which ends on Jan 31. In the fourth quarter of fiscal 2020, Walmart’s cost of sales reached $107.75 billion compared to $104.9 billion in the same quarter in fiscal 2019. In fiscal 2021, the company  has incurred cost of sales equal to $204.7 billion during the first half of the year compared to $190.96 billion in the same period during the previous fiscal. Walmart’s cost of sales is expected to remain higher than $400 billion in the latest fiscal.

Walmart’s Other Operating expenses

Apart from the cost of sales, the other major category of expenses that Walmart incurs to operate its business globally are included under operating, selling, general and administrative expenses. These costs include all the operating costs of the company except the cost of sales. As a result, Walmart includes the majority of the cost of warehousing and occupancy for the Walmart U.S. and Walmart International segments’ distribution facilities in operating, selling, general and administrative expenses. The following table shows Walmart’s operating, selling, general and administrative expenses for 2018, 2019 and 2020.

YearOperating, selling, general and administrative expenses.
2020$108,791
2019$107,147
2018$106,510

As a percentage of net sales, Walmart’s operating, selling, general, and administrative expenses have continued to decline over the last three fiscals. In 2018, these expenses were 21.5% of the net sales of the company and then declined to 21% in 2019 and again 20.9% in 2020. Apart from the growth in comparable sales, the increased focus of the company in managing its expenses led to the drop in operating, selling, general and administrative expenses as a percentage of net sales during fiscal 2020. 

Walmart’s strategy includes improving its customer facing initiatives in stores and clubs and creating a seamless shopping experience for its customers. So, the company is investing more in  eCommerce, technology, supply chain, and store remodels. Compared to the previous years, it is spending less on opening new stores and clubs. In the fiscal 2020, Walmart’s capital expenditure on eCommerce, technology, supply chain and other (in the US) were $5.64 billion compared to $5.22 billion in fiscal 2019. The company spent around $2.2 billion on store remodeling (in the US) in fiscal 2020 compared to $2.15 billion in fiscal 2019. On the other hand, it spent only $77 million on opening new stores and clubs (including relocations) in fiscal 2020 compared to $313 million in fiscal 2019. 

Internationally, the company spent $2.8 billion on these things in fiscal 2020 compared to $2.7 billion in 2019. Walmart’s focus on digital commerce has grown and the company is spending more on technology to provide its customers an omnichannel experience. Net cash that the company used in investing activities in fiscal 2020 was $9.13 billion compared to $24 billion in 2019. It mainly included the cash spent on payments for business acquisitions and to expand Walmart’s eCommerce capabilities, investment in other technologies, remodelling of existing stores and clubs and addition of new stores and clubs. Overall, the net cash used in investment activities declined by more than $14 billion in fiscal 2020 as compared to 2019. It was mainly because the company had spent $13.8 billion on completing its acquisition of Flipkart in fiscal 2019.

Walmart’s advertising expenses:

The retail industry is marked by heavy competition and apart from the physical retail stores, Amazon is a leading competitor of Walmart. Walmart is already a well-recognized brand. However, to drive demand higher and grow sales as well as to maintain its market position, it is essential for the company to invest in marketing activities and promote its brand and products. The company spends a large sum each year on advertising and promotions. In fiscal 2020, Walmart spent $3.7 billion on advertising compared to $3.5 billion in fiscal 2019. Walmart is now using digital advertising heavily to drive sales and grow brand recognition. Apart from that, it also uses print and television advertising. 

The following table shows the advertising expenses of Walmart over the previous five years.

YearAdvertising Costs ($bn)
2020$3.7
2019$3.5 
2018$ 3.1
2017$ 2.9 
2016$ 2.5