Walmart, the world’s largest retailer, announced a 3-for-1 stock split on January 30th, 2024. This is Walmart’s first stock split since April 1999 and comes as the company’s shares trade just below their all-time high.
Details of the Stock Split
As per the announcement, Walmart shareholders will receive two additional shares for every share held. The stock split is still subject to shareholder approval at the company’s annual meeting in June 2024.
If approved, the stock split will take the company’s total outstanding shares from around 2.95 billion currently to 8.85 billion. The stock split will also reduce Walmart’s share price by a commensurate amount, making it more accessible to retail investors and employees.
|Current Share Structure
|Post 3:1 Stock Split
|Around 2.95 billion outstanding shares
|Around 8.85 billion outstanding shares
|Share price around $155 (as of January 30th 2024)
|Share price would reduce to around $52
Walmart said the stock split “underscores its commitment to the Associate share purchase plan and the turnaround in Associate share ownership over the past year.” The retailer has been working to boost employee stock ownership, which has climbed from 52% to more than 56% over the past year.
Walmart Stock’s 25-Year Run Leading to the Split
Walmart’s share price has seen tremendous growth over the past 25 years. Adjusted for stock splits, Walmart’s share price was around $4.25 in early January 1999 compared to over $155 recently.
Driving the steady share price rise over more than two decades is Walmart’s continued growth into the world’s largest retailer with over $573 billion in fiscal 2023 revenue.
Some of Walmart’s major achievements over the past 25 years:
- Grew annual revenue from $117 billion in fiscal 2000 to $573 billion in fiscal 2023
- Expanded from around 3,000 stores globally to over 10,500 now
- Launched walmart.com in 2000 – now a $77 billion online business
- Entered new countries like China, India, Africa
- Acquired ecommerce companies like Jet.com to bolster online business
Buoyed by the strong, consistent growth over the past 25 years, Walmart stock generated a massive 22,000% return between January 1999 and January 2024 when adjusted for stock splits.
Why is Walmart Doing a Stock Split Now?
Walmart seems to have timed the stock split to perfection as its shares surge to all-time highs, making the stock price a bit expensive for retail investors.
At over $155 per share currently, Walmart has one of the highest absolute share prices in the Dow Jones Industrial Average. With the 3-1 split, Walmart is seeking to make its share price more accessible.
Walmart Stock’s Ranking in the Dow Jones Index
|Price Post Split
|Potential New Rank
The stock split will also allow the company to continue boosting employee share ownership through its Associate share purchase plan. Lower post-split prices can encourage more employees to buy Walmart stock going forward.
Finally, studies show that stock splits cause an anomaly where the share price rises post-split even though the company’s value remains the same. Walmart seems to be capitalizing on this market inefficiency with the timing of its 3-for-1 split.
What Comes Next for Walmart Stock After the Split?
If history is any indication, Walmart stock’s momentum could continue post-split as well. Looking at the company’s post-split performance in 1999, Walmart stock rallyed a further 90% over the next year and 250% over the next 3 years.
What drove the continued rise? Walmart sustaining its incredible earnings growth even after the 1999 split.
Walmart’s Post-Split Price Performance in 1999
|April 1999 (split date)
|1 year later
|3 years later
^^*Share ^^prices ^^adjusted ^^for ^^splits ^^and ^^dividends
While duplicating the prolific post-1999 gains with the current mature size could prove difficult, Walmart still has levers for strong growth ahead to extend this bull run. These include:
- Growing its ecommerce division – forecast to hit $77 billion in sales in fiscal 2024
- Expanding into new international markets
- Leveraging its huge scale in grocery to lower prices
- Integrating technological innovations across stores and supply chains
If Walmart can sustain its earnings momentum through these initiatives after the 2024 split, history suggests substantial upside still for this retail juggernaut.
With the stock split opening up Walmart stock to more potential investors, Walmart seems poised to continue its epic 25-year run for the foreseeable future. Investors who missed out on the sensational gains so far could have another opportunity to buy into this retail growth leader at a more accessible price when the split takes effect later this year.
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