Grocery Giants Unbagged: The Battle for Market Dominance

Good Morning,

Welcome to another edition of ChartWiz, where we visualize financial data in bite-sized portions. In today's edition, we place the spotlight on the titans of the grocery world—Costco, Walmart, and Kroger—to assess their decade-long market performance.

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INDUSTRY ANALYSIS - SUPERMARKET GIANTS

Today we're sizing up the supermarket scene with a fresh look at the titans of the grocery world. Our feature chart serves up a comparative feast of the Top 5 U.S. Supermarket Chains by Market Cap, providing a financial flavor profile of these retail behemoths as of April 7, 2024.

• Walmart (WMT) leads the pack with a colossal market cap of $481.96B and a recent quarter's revenue of $173.39B, towering over its competitors with the weight of its vast global footprint.

• Costco (COST) carts in with a hefty market cap of $316.54B and an impressive $58.44B in recent revenue, marking its status as a wholesale heavyweight.

• Kroger (KR), with its more specialized market approach, posts a market cap of $41.36B and respectable revenue of $37.06B.

• Not to be overlooked, Target (TGT) checks out with a market cap of $79.3B and a solid $31.92B in revenue.

• Albertsons (ACI) rounds out our list with a market cap of $12.11B and $18.56B in revenue.

Stay tuned as we delve deeper into what these numbers mean for the industry, trends, and the future of food retail.

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EARNINGS BREAKDOWN - COMPARING REVENUES

Here's a concise breakdown of our latest revenue report from the supermarket sector over the last 20 quarters:

• Kroger's quarterly revenue sees a minor shrinkage of 0.5%, dipping from $37.3B to $37.1B.

• Costco witnesses a substantial revenue rise, up 68.2% from $34.7B to $58.4B.

• Walmart showcases an impressive 39.9% increase in quarterly revenue, jumping from $123.9B to $173.4B.

Kroger's revenue growth has been modest due to several strategic and economic factors. While they did see an overall sales increase, this was underpinned by a significant push in their private label brands, which offer higher margins than national brands. Their strategy involved passing increased costs to consumers, likely due to inflationary pressures, and leveraging their private brands to appeal to cost-conscious shoppers. Kroger’s digital business has grown to $12 billion in annual sales, and they've increased delivery sales by 24% over the previous year. Their emphasis on their private label offerings and their ability to attract higher-income customers to their stores has helped maintain profitability even as they invested in price promotions heavily financed by consumer packaged goods (CPGs) companies.

Costco's revenue growth can be attributed to its membership-based business model and its ability to offer high-quality products at competitive prices. Their approach generates consistent revenue and customer loyalty, especially during market volatility when consumers seek cost savings. Additionally, Costco's global expansion and growth of its private label brand, Kirkland, along with digital platform adaptations, have contributed to its resilience. Analysts remain optimistic about Costco's future, citing strong membership trends and the ability to capitalize on digital opportunities.

Walmart's growth, on the other hand, is partly driven by its vast and diverse global operations, encompassing not only retail but also a strong e-commerce presence. With aggressive price competition and a wide range of products, Walmart has successfully captured a significant market share, contributing to its continued revenue increase. The retailer's scale allows for cost efficiencies and the ability to adapt to consumer needs quickly, which has been pivotal in driving revenue amidst various economic conditions.

KROGER - HOW THEY MAKE MONEY

The financial diagram for Kroger reveals how their sales and revenue streams contribute to their overall profitability:

• Total revenue stands at $37.06B, bolstered by fuel sales contributing $3.91B.

• Fuel sales account for approximately 10.5% of total revenue.

• The merchandise costs are $28.64B, which are the primary expenses deducted from sales to calculate the gross profit.

• Gross profit is noted at $8.42B, indicating a strong performance in revenue generation versus costs of goods sold.

• After operating expenses of $7.23B are accounted for, the operating income is $1.19B.

• Post deduction of interest and taxes ($455M), the net income is a significant $739M.

COSTCO - HOW THEY MAKE MONEY

• Total Revenue: $58.44B

  • Sales Revenue is the bulk at $57.33B.

  • Membership Revenue contributes $1.11B, approximately 1.9% of Total Revenue.

• Costs and Profits:

  • Cost of Goods Sold (COGS) is $51.14B, a significant portion of Sales Revenue.

  • Gross Profit stands at $7.3B.

  • Operating Expenses tally up to $5.24B, indicating strong control over costs.

• Bottom Line:

  • Operating Income reaches $2.06B.

  • After $319M for Interest and Taxes, Net Income is a healthy $1.74B.

Membership revenue, while a small portion of total revenue, is crucial due to its high margin and indicates customer loyalty. The substantial net income showcases Costco’s efficiency and the effectiveness of their low-cost, high-volume business model.

WALMART - HOW THEY MAKE MONEY

• Total Revenue: $173.39B

  • Walmart U.S.: $117.64B.

  • Walmart International: $32.42B.

  • Sam's Club (excl. memberships): $21.85B.

  • Memberships: $1.47B, accounting for a small yet significant portion of the total.

• Profit Calculation:

  • Cost of Sales is $131.82B, indicating the significant cost of maintaining such extensive inventory.

  • Gross Profit stands at $41.56B.

  • Operating Expenses are at $34.31B.

• Final Profit:

  • Operating Income hits $7.25B.

  • Net Profit after tax and interest payments is $5.49B.

This structure highlights Walmart's capacity for high-volume sales with a diverse income stream from different sectors and memberships, all contributing to its substantial net profit.

HISTORICAL RETURN

How $10,000 Invested in Kroger (KR), Costco (COST), and Walmart (WMT), would have returned 10 years ago.

Reflecting on the investment values over a decade from a starting point of $10,000:

• Walmart (WMT): Your investment would have seen a 132.61% increase to $23,261.

• Kroger (KR): Kroger's stock resulted in a 153.25% growth, reaching $25,325.

• Costco (COST): A standout performance with Costco, as the investment soared by 539.82%, accumulating to $63,982.

WORD FROM WIZ

That’s all we have for you in today’s edition of ChartWiz. If you found this valuable, please consider forwarding it to a friend.

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Have a fantastic week!

-Wiz

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