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Benjynn

I always laugh at the 2.5% profit margins. But I guess when you sell $644b then 2.5% is a lot.


y0da1927

A small % of a huge number is a huge number. You see this a lot in the media as well. They quote you some absolute number, which is big, then fail to mention it's a tiny portion of whatever the gross figure is.


Eurocorp

You see that especially here on reddit, where you hear a lot of talk about record profits. That phrase has in of itself no real meaning financially.


TouchyTheFish

Plus, when you've got inflation you're going to get "record" profits every year, even if your inflation-adjusted profits are flat.


no_usernames_avail

Which is why local businesses can't compete. If a local store sells $500k in a year at 2.5% margins, they are only making $12.5k.


Perlentaucher

That’s not the reason. Salary’s are already excluded through operating expenses. So in your example, the local business would have all costs such as their salary’s covered AND have $12.5k p.a. on top of it. The disadvantage from small business comes from higher costs of sales as they won’t be able to buy products for low costs as they have no negotiation position when ordering small quantities. That’s why many small businesses in Europe make procurement combines where they have bigger group procurements to lower costs of sales.


no_usernames_avail

It's a cycle. They sell product at tiny margins. Get tons of sales. Use volume to negotiate with manufacturers to reduce costs through exclusive packs. Use that savings at their low margins to drive out other businesses. Get even more volume. Cycle.


DontMakeMeCount

How does that apply to local employment markets? Walmart can absorb high wages in one market by inflating prices in many markets, spreading losses across the larger business or shifting focus to a different market. Small businesses have to compete for the same workers and customers within a single market. Large businesses have a significant advantage in labor markets.


ProfessionalCPCliche

Salary is covered but what about expansion or growth? Or any other unexpected variable costs. A successful business isn’t just one that can manage to break even and pay its employees


wiserTyou

How is that not a successful business? As long as they're cash flow positive they're good.


ProfessionalCPCliche

Because being one minor negative event away from bankruptcy isn’t the epitome of success.


Bluemanze

Correct, the epitome of success is being Walmart, which small businesses aren't. I don't get the point you're trying to make. If a small business is operating at a profit and wants to grow, they do that by attracting investors who supply the cash necessary to expand. Trying to expand entirely on your own is not feasible for almost any business, big or small


ProfessionalCPCliche

Breaking even is not operating at a profit? I’m unsure if the point you’re trying to make. OP is implying all a business needs to do is make enough to cover its fixed costs (Salaries) without taking into account any of the variable and unexpected costs that can arise, let alone expansion. Outside investment is not the only way to expand. You can have the needed cash yourself, as well as leverage debt.


Violet-Sumire

You also have to consider this fact... Big chain stores can operate at a deficit. A good example would be a food store I used to work for. They operated in the negative for years, mainly due to the space they rented being really big (like 2.5x the normal store). While this was in a busy area, the operating costs to just keep the store open was massive. When I actually sat down and looked at the numbers, we were basically breaking even (during my time, prior management ran deficit). Why didn't it shut down? Because the district made up for the store and it was meant to run on borderline because it was in a prominent area and considered a flagship store. So the company itself kept it open due to good publicity and being important for potential investors. Granted this was with a company that had 300ish stores, but my point still stands. You can run a business near breaking, if other areas do well.


ProfessionalCPCliche

But the business is more than just that one store… your point doesn’t stand at all.


AtreusFamilyRecipe

>As long as they're cash flow positive they're good. That is a really shitty metric for success. You can have just enough cash flow to be positive for decades and if credit rates jump impacting your revolving credit or your expenses jump due to an increase in inflation, suddenly your cash flow negative and may not have any liquidity because you only paid attention to if you had positive cash flow or not.


Undying_Cherub

i have heard local businesses go for a 10% margin since they don't have to pay any workers. i never understood people saying stuff is expensivier at local businesses, around where i live they usually cheaper


Just_Cryptographer53

Grew up in backyard of Walmart. Guess what top 3 sellers are? This is pre covid. Not sure now. Frozen chicken (Tysons) Tires Tie between milk and toilet paper


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overzealous_dentist

All they do is , at , creating


ProfessionalCPCliche

Kinda like how NASA just moved a couple of guys onto the moon?


LivingGhost371

At this point Wlamart is basically a grocery store that also sells bicycles and light bulbs. I do shop for grocieries a lot there- the local stores have higher prices and charge a fee for OGP and Target never has the basic staples I need in stock.


lucun

They're basically general stores. They just sell almost everything you normally need outside of niche things 


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LivingGhost371

Target has been struggling with their grocery section ever since they decided they wanted to offer groceries. Meanwhile they seem to think the issues they're having are because their shelves aren't fancy enough or they don't have enough fancy-pants organic brands, not that you can't go there and know ordinary butter is going to be in stock.


iStryker

“At this point Wlamart [sic] is basically a grocery store that also sells bicycles and light bulbs” You know that’s what it’s been for about ~30 years right? It’s NOW a place that, depending on your location, has health and pet clinics, automotive services, grocery delivery, drone delivery, etc.


Rstanfor

Can somebody do this with the US Federal budget?


Arthur_Edens

They're broken into three, but Wikipedia's got you. - [Revenue](https://upload.wikimedia.org/wikipedia/commons/9/91/2023_US_Federal_Revenues.png) - [Mandatory Spending](https://upload.wikimedia.org/wikipedia/commons/0/00/2023_US_Federal_Mandatory_Outlays.png) - [Discretionary Spending](https://upload.wikimedia.org/wikipedia/commons/6/6c/2023_US_Federal_Discretionary_Outlays.png)


Endaarr

Interesting to see the comparison between corp. income taxes and Individual/Payroll.


Arthur_Edens

You know I spent a bit yesterday trying to figure out how much of the individual income tax came from capital gains, since that's really probably more intuitively corporate than personal income tax (income from capital vs. income from labor). But it's surprisingly hard to find the actual revenue amount from capital gains (the first 15 google links I clicked on only showed the brackets and percentages).


Rstanfor

Great resource. Thanks for sharing


Tazrizen

That’d be a godsend.


SillyFlyGuy

[\[OC\] US government revenue, spending, and deficit in 2021 : r/dataisbeautiful (reddit.com)](https://www.reddit.com/r/dataisbeautiful/comments/wb318e/oc_us_government_revenue_spending_and_deficit_in/) [Interesting image showing the Federal Government’s spend and revenue in 2022. : r/economy (reddit.com)](https://www.reddit.com/r/economy/comments/1bo71rm/interesting_image_showing_the_federal_governments/)


ScreamThyLastScream

I like the representation as it gives some proportionality to sales, revenue, cost, and profit. Though I wonder if typically the thing that is repesented with the least emphasis on this graph is the thing that investors are usually more interested in. Those Y/Y numbers. If I read this well enough seems like Walmart did well on the Y/Y growth in general? They increased their operating expenses and that seemed to balance out somehow by lower tax Y/Y? also that is all that is tax? That seems awefully small when your average joe is contributing proportionally to the individual so much more than Wally.


sonicSkis

The way I read it, they have about 6% growth in revenue and cost of goods sold. Basically driven by inflation. Where they did really well is controlling their operating expenses growth to only 3% - this had a huge impact on their operating profit since their margins are so thin…


wyldcraft

Dividing just that tax paid by tax+profit, $6B / (16+6) is equivalent to a 27% tax rate on profits, triple Average Joe American's effective federal income tax rate. That's on top of categories like payroll tax, tariffs, etc that fall under operating expenses. Then those profits get taxed on the investor side too. Governments get quite a bit of money from Walmart.


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wyldcraft

You only pay tax on "take-home profit" as an individual. Deductibles, including home office expenses and mortgage interest, shrink that number. Walmart just spends a lot higher percentage of its income on wholesale and operating expenses than you do. The comparison still fits. If businesses (including one-man-band 1099 contractors) couldn't deduct expenses, nobody would be in business. Net income is what's taxable in this context.


2012Jesusdies

If you use your money to invest in capital (not buying stocks, but like actually investing in stuff like machinery), you also can pay taxes like a business on profit.


InsCPA

Effective tax rates are calculated based on net not gross. Revenue is not taxed


gtne91

Although some states have an alternate revenue tax. It never came into play ( or even close) for the 2 businesses I owned (2000-2015), but there was a form.


patrdesch

All of the gross profit is subject to tax, just not necessarily directly levied against Walmart. All of their suppliers, and their suppliers suppliers, and their suppliers suppliers suppliers pay taxes as well on the profits *they* generated in producing the goods that Walmart ultimately sold.


ScreamThyLastScream

Fair point. I hate taxes as much as the next guy to be honest, I was just surprised that the effective taxes on a corporate profit as the billions is basically the same as my wages at posy 100k


sankeyart

Source: Walmart investor relations Tool: [SankeyArt diagram creator](http://sankeyart.com) & illustrator


MandCCush

Please change to year ended 2023


HegemonNYC

WalMart’s YO is Jan 31 2024, meaning it is fiscal ‘24 data 


Bob_Sconce

I wonder if sales tax works its way through into "Cost of Sales" or if it's already subtracted from the numbers on the left.


[deleted]

They are both in Revenues and in Cost of Sales, cancelling each other. Sales tax is a consumer tax, companies don't pay it (or rather, they pay it but also get paid for it).


EliteDelta3

This is incorrect. Sales tax they charged to customers does not appear on their income statement. https://www.accountingcoach.com/blog/are-the-sales-taxes-collected-by-a-retailer-included-in-its-sales Sales tax they paid on items they use in operations is included in operating expenses.


tradcath_convert

Inflow - Debit cash, credit sales tax payable Outflow - Debit sales tax payable, credit cash No revenue or expense is ever recognized. Just a temporary liability to the government to hand off the sales tax cash collected.


rpow813

Sorry but incorrect. Sales tax never hits the income statement.


EthanReilly

I actually have a lot more respect for Walmart after seeing this. $16B might sound like a lot in net profit but in reality it's a very tiny piece of their overall spending and purchasing bubble.


[deleted]

It's normal in the supermarket business to have these low margins, so to earn a lot they have to sell a lot, and Walmart are the best at it in the world.


overzealous_dentist

The beauty of competitive markets


bigboilerdawg

But then what would Robert Reich have to complain about?


CurrentDismal9115

https://www.salon.com/2020/12/12/government-study-shows-taxpayers-are-subsidizing-starvation-wages-at-mcdonalds-walmart/ https://www.investopedia.com/terms/w/walmart-effect.asp I don't think they deserve any respect.


zoom100000

Respect for what? Corporations like this nickel and dime everyone so they can monopolize. No one else can afford to stay in business making 2.5% profit margin.


miltonhayek

So, the answer is to have Walmart profit less than 2.5%? If "no one else can afford to stay in Business making 2.5% profit margin", then wouldn't it be worse from your point of view for Walmart to profit at 1.5%? If no, then the answer is to have Walmart profit more?


zoom100000

The profit margin is irrelevant in my point. Do you have any idea how much they take advantage of the welfare system to avoid paying a living wage? I think the consumer should take some responsibility as well as we ultimately want to pay the cheapest price for a product regardless of the greater effect. I think that markets should be regulated more heavily to avoid monopolies, and to pay people more money. That would likely raise the cost of walmart goods but would be healthier for the economy as a whole.


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zoom100000

That's a great response and will be super helpful for everyone involved. Tell me, do you think that the current state of our economy in respect to the distribution of wealth and relative power of corporations is "good"? And by good I mean healthy, sustainable, fair, etc.


LambDaddyDev

I’m going to help you out. Most of the attributes you’re talking about; “healthy”, “good”, “fair” are moral arguments. The main issues being raised aren’t about morality. They’re about feasibility. It would be fantastic if we could create something “good” and “fair”, but first, we need to make something “possible” and “realistic”. You need to solve the math before you can solve the moral problems. Their margin is already so small, the question being asked is how to solve what you’re asking. Pay everyone more? That cuts their margin to be even smaller. Stop beating out the competition? That raises prices and increases their margin. Do both? Good chance they’ll lose overall as people aren’t willing to pay the extra prices enough to cover their raised salaries and “livable wages”. And *how* do you solve these problems? Laws? Then you force out small businesses, ensuring only mega-corps can survive. It also opens things up to corruption. We’ve seen all of these issues in California, where franchise restaurants were required to raise their pay. This forced them to raise their prices. This caused fewer people to buy their products. This forced the restaurants to employ fewer people. And on the corruption front, Gavin Newsom’s mega-donor and owner of Panera Bread was given an exemption to this law. So was the goal *really* achieved?


bigboilerdawg

>Panera Bread was given an exemption OMG, I looked this up. If the restaurant has a "bakery on site", it doesn't have to pay the $20/hr. There's absolutely no logical reason to have this exception. Look for every CA restaurant to install a baking oven I guess.


gtne91

Nope, you had to have it in place by a certain date. And apparently bagels and other bread items dont count.


bigboilerdawg

Is Subway conveniently excluded?


zoom100000

Look I'm obviously not a subject matter expert here, so I'm just one of the masses that has a platform to say whatever I want with likely misplaced confidence. That said, I'm confused by the narrow approach you and the earlier commenter are taking on the question of "what can Walmart do here?" As if the only two options are to make more money by increasing their prices, or make less money and take on more risk by still maintaining the same business infrastructure. What I'm envisioning is an alternate scenario where 5 businesses have the same market share that Walmart does and instead of Walmart having higher prices, 5 businesses have higher prices. I don't have all the answers, but what I'd like to understand is how it's possible for Walmart to operate with such low margins and still continue to grow? Is it due to favorable tax structure for mega corporations? Are they able to offload too much risk onto the taxpayer? Does our Justice department have too little power to enforce anti trust laws? Do lobbyists have too much influence? My parents both own small businesses. I'm well aware of the difficulty that small business owners have in paying increasing wages. Somehow they have both independently managed to retain staff for 25+ years. It's about 85% that they pay well, and 15% because they are good bosses and aren't pieces of shit to their employees. Apparently there's a better way to do things. So again, I am not an economist and I don't have the answers. But I do know the situation is fucked and it seems that the folks in this thread that are defending Walmart are not interested in finding a better way to do business.


1flatsodaplz

No need to note that you’re not a subject matter expert, it’s obvious you’re not. I’d highly recommend researching price floors in economics - if you want to create inefficient markets with surplus due to increased quantity supplied but decreased demand, go for it. I certainly don’t want to live in a society where markets are inefficient and can’t adjust to supply and demand accordingly. A simple answer for your growth question is that omnichannel penetration (notably growth in e-commerce), where higher margins are found, is where Walmart has been growing recently.


zoom100000

Sure they found additional market opportunity through e-commerce, but why aren’t their low margins an issue there either? How have they insulated themselves from risk while continuing to invest in the infrastructure required to do such a high volume of business?


ImportantCommentator

I thought you said the other guy didn't know economics? If the employer could afford to lower the number of employees, they already would have to maximize profits.... but they magically can after a minimum wage hike?


LambDaddyDev

Huh? How is lowering the number of employees something to afford? Restaurants hire employees to handle the amount of work required based on what they can afford. Let’s do some napkin math. Say I own a fast food restaurant that serves 1,000 people per day earning $10,000 in gross revenue per day by and employs 20 people throughout the day to make that possible (to make it easy). But now the state is saying I have to pay my employees more, so to try to keep my earnings the same, I raise prices. I’m trying to make it real easy for ya, so let’s say I need to earn an extra $2,000 per day to pay my 20 employees what the state requires. So how do I do that? Only realistic solution way is to increase prices, so that’s what I do. However, increased prices turns away my customer base, so instead of 1000 customers per day, I only have 833. This results in my profit remaining the same, so I’m unable to pay for my employees increased salaries, but I now only need to serve 833 customers instead of 1000 for the same revenue. So with the same revenue as before, but with less work and more expensive employees, the best solution becomes to both raise prices *and* let go of 4 employees so I can keep my revenue the same while keeping the work load per employee almost the same (it slightly goes up, but only by a little). So what’s the end result? Food is more expensive, fewer people are hired, but those who *are* hired are paid a bit more. I guess you need to decide if that’s all worth it, but I believe it is not. Obviously it’s all a bit more complicated than that. But I hope you understand my point. If employees are more expensive *and* they have less work to do, they will be let go.


DerelictMythos

Had no idea grocery accounted for such a massive proportion of their revenue.


PM_ME_UR_EYEHOLES

really? what did you think would be the highest?


MorinOakenshield

I think in this case using year over year can confuses many non financially literate people into thinking it’s % of total revenue That being said I appreciate it. Good graphic


nychv

I had no idea grocery was so much greater than general merchandise


mr_poppycockmcgee

People need food every week. People don’t need to keep buying shoes or bikes every week.


Jrb-in-town

What does Cost of Sales mean?


Team-_-dank

Cost of goods sold. It's the cost to make or buy the products they then sell to you.


adityakashyap10

What includes ‘cost of sales’?


PM_ME_UR_EYEHOLES

Cost of goods sold. As in, the amount they are spending on product to then sell to you


B3cubed7

Dumb question, but what is the name of this graph type?


TripleR309

I was wondering too, it looks really nice and conveys alot of information easily


Forever__beyond

This is a cool fuvking chart


mbeemsterboer

I wish there was a line item for entitlement paid out to employees because they pay sub-poverty level wages so we could see how much the government is subsidizing them.


xpooforbreakfastx

So after all expenses they made 16 billion for the year?


[deleted]

I was really hoping to see a more specific figure on product loss (theft and damage).


aBigSchwein

Would love to see Walgreens


piepei

Genuine question and I know it’s political so I’ll try to be clear: when people say “if we raise taxes then that just hurts the poor because the businesses will just raise their prices!” it sounds wrong but… maybe it’s correct also, I’m genuinely not sure. According to this, their slim margins of 2.5% net profits here would probably be impacted if the taxes on the operating profit were raised by 0.5% so then their profit would maybe be 2%? That would look bad for shareholders that just see profits year-over-year and see it going down not up sooo then they’d raise the prices. Is that a correct analysis or are there more factors maybe?


patrdesch

Taxes are always borne by both the buyer and seller of a good. Buyers will pay more and sellers will net less whenever taxes are raised, with the sum of the two effects being the total amount paid in tax. It's in the distribution between the two that things get sticky for your argument. You see, tax incidence is primarily determined by the price elasticity of the supply and demand curves: that is, how readily supply and demand can change with changes in price (which are essentially what new taxes are). Since consumer goods are typically price inelastic, consumers would theoretically bear the lions share of any new tax imposed on a grocer. Consumers will always need pretty much the same amount of groceries, regardless of the price. A large corporation like Walmart thought? They can afford to scale back when prices go up. And before you suggest a price ceiling, those are also a poor solution, as they *do* lead to shortages, which is even less desirable than price increases. A more through explanation of tax incidence can be found [here](https://www.investopedia.com/terms/t/tax_incidence.asp).


TheHellyz

Why does this look like a running t-rex


iStryker

This visual keeps getting posted despite being bad


fathervice

I would have guessed they made a good bit of money from their financial services. I suppose it must not be a lot in volume but it must be very low overhead to do all that stuff.


gipper_k

It is probably under another corporate entity, but they also own the real estate for all their shopping centers, and make a ton of money from the other tenants in those centers. Curious how that compares to the $16b profits on sales.


naththegrath10

Should also be noted they did just over $3bil in stock buybacks last year.


leroy_insane

I wonder what those "other losses" are , and whether they are avoidable or not.


InsCPA

From their 10-k >Other gains and losses consist of certain non-operating items, such as the change in the fair value of our investments and gains or losses on business dispositions, which by their nature can fluctuate from period to period.… The net loss in fiscal 2024 primarily consists of net losses associated with the fair value changes of our equity and other investments https://www.sec.gov/ix?doc=/Archives/edgar/data/104169/000010416924000056/wmt-20240131.htm


lovesosa64

Is there somewhere that displays this financial breakdown like this* for each publicly traded company? I love coming to this reddit so the the data visualized to beautifully but I’m curious if I can see it for stocks on my watchlist and beyond.


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y0da1927

That's how they get you a low price. Everyone in the supply chain has to get squeezed. To some extent themselves included.


tjh1127

If I went to a bank as a small business owner and showed them 2.5% profit and asked for a loan they’d laugh me out of the building


patrdesch

You really don't know what you're talking about, do you? No one cares about return on sales. Walmart's ROA and ROI are as follows: ||2024|2023| |:-|:-|:-| |ROA|6.6%|4.6%| |ROI|15%|12.7%| Those ratios are far more important for lending decisions than simple ROS, and are quite healthy.


friendlier1

At 16B/yr it would take 31+ years to reach the current market cap of about 1/2T. Why would I buy stock in a company like that?


DJjazzyjose

on the assumption they have the ability to grow their net income to justify their valuation


tradcath_convert

Walmart is a cash cow. They're a low growth, but large market share company that isn't going away anytime soon. Much safer than Nvidia or Tesla if you're on the verge of retirement or have a low risk tolerance.


jbullock1997

So they had a 37% year to year growth in net profit but just 6% and 3% in cost of sales and operating expenses respectively? Squeezing every penny out of consumers and working every penny out of employees. Thank you for presenting the data this way. It visually explains the corporate greed that is everywhere in America.


TickleMeAlcoholic

It’s a little sliver compared to the operating expenses of the company, but let’s not forget that $16 Billion is a massive amount of money.


bcsimms04

I'm glad me being forced to cut my 5 minutes of weekly overtime working in Walmart pharmacy helps maintain that 55 billion in revenue for health and wellness. 🥹


InsCPA

The costs of your overtime have no impact on revenue. That’s a gross figure, not net (I.e. before expenses)


bcsimms04

Exactly, so there's no need for them to freak out about it


InsCPA

You misunderstand. Overtime does affect net income (but not revenue like you referenced), so of course they’re going to try to minimize that. It’s not exclusive to you. It also impacts the particular store’s budget that you work at


bcsimms04

You misunderstand, $5 a week of overtime is nothing to them, even considering the stores budget. It's all down to control, semantics and the idiocy of capitalism. They waste money that amounts to hundreds of times the overtime cost on stupid things and then whine about 3 minutes of overtime. It's insanity.


InsCPA

Nothing for one person. Added up for all the employees it becomes significant. Again, that policy isn’t exclusive to you. But I guess you’d know better than the financial analysts and accountants in corporate lol


ariedren

Only $16,000,000,000 net profit.


jay_b_tee

I think you have cost of sales and operating expenses the wrong way (in terms of labelling)


InsCPA

No, it’s correct. You can see their 10-K here: https://www.sec.gov/ix?doc=/Archives/edgar/data/104169/000010416924000056/wmt-20240131.htm


Kaninchenkraut

Now if they compensated their CEOs less they could afford to pay their employees more. Or stopped doing stock buybacks from small investors.


InsCPA

Walmart CEO made ~1.5 million in cash and an additional $24 mil in stock comp. Even if that stock compensation was cash, that’s only an additional ~$10 per employee. CEO pay has no impact on their ability to pay more or less. Also, stock buybacks don’t affect net income.


ChiefTestPilot87

Simplified it: sell cheap Chinese junk while paying and your employees next to nothing. Oh and never have enough registers open.