Spinoff #1: Walmart (WMT) Spinning off Sam’s Club
Walmart is caught between a struggle to compete with e-commerce giant Amazon.com (AMZN) on price and the fact that its megastores are largely rural and largely cater to lower-income Americans who continue to see weak spending and disappointing jobs prospects.
Amid this, however, Sam’s Club has seen some signs of growth. The warehouse does $56 billion in revenue on its own, operating 621 locations in the U.S. and Puerto Rico with about 47 million members, according to its corporate fact sheet.
It’s still a much smaller cash cow than Costco (COST), which does $100 billion in sales, but boasts a very similar number of locations and members. Given the right leadership and strategy, who’s to say that Sam’s couldn’t go toe-to-toe with Costco? Besides, before BJ’s Wholesale Club was taken private in 2011, that warehouse chain boasted only about $11 billion in revenue and roughly 200 locations. Sam’s is already bigger than that, so it can stand on its own two feet.
If Walmart is looking to unlock shareholder value, spinning off a more attractive Sam’s unit might make sense. Furthermore, the domestic warehouse game seems vastly different than the global distribution network that Walmart is working out to fuel global expansion in its big-box stores around the world.
Hey, crazier things have happened.