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Walmart (WMT 0.42%) is the biggest company in the U.S. Its annual revenue of nearly $500 billion gives it the top spot within the Fortune 500. It's also, by far, the largest private employer in the country, with about 1.3 million U.S.-based employees.
However, just because it's the biggest company in America doesn't mean that it's one of the best. Let's take a look at how Walmart has been doing in recent years for all of its stakeholders: investors, employees, customers, and the world at large.
Strong financial performance, but cracks are forming
Walmart's profit margin is relatively low, but the company is still a real cash cow for investors. In its most recent fiscal year, net income attributable to Walmart was approximately $16 billion on revenue of $476 billion. The company achieved a solid 17% return on invested capital, and produced more than $10 billion of free cash flow.
In absolute terms, Walmart is a very strong business. That said, it's struggling to adapt to the changing retail landscape. Revenue growth has been anemic recently, and Walmart's earnings, return on invested capital, and free cash flow all declined last year. As a result, Walmart shares have stalled out since mid-2012.
Walmart five-year stock chart. Data by YCharts.
This year, Walmart is ramping up its investment in small-format stores within the U.S. in order to jump-start growth in its home market. In the long run, this strategy may allow Walmart to continue growing while generating a strong return on invested capital. However, this new strategy will take a few years to really pay off.
A controversial employer
Walmart's employee relations are a topic of discussion across the U.S. Walmart is frequently contrasted with fellow big-box retailer Costco. Costco's average employee wage is nearly $21/hour, whereas the average wage at Walmart is less than $13. Walmart has also been accused of unlawfully interfering with worker protests and unionization efforts.
Employee reviewers have given Walmart a mediocre 2.9 stars out of 5 on Glassdoor. Many employees think that there are good promotion opportunities for top performers, and that Walmart offers decent benefits. On the other hand, many employees complained of being overworked for low wages, and found management unresponsive.
Walmart is far from being the worst company in America from a labor relations standpoint. While wages tend to be low, very few Walmart employees actually make the minimum wage. Walmart also hires many people who would otherwise have trouble finding a job. However, the company could clearly do a lot better in terms of keeping employees happy.
Helping customers save money
Walmart's corporate slogan and mission statement is, "Save Money. Live Better." It's hard to quantify just how much money Walmart saves its customers; but the sums are enormous. In 2006, conservative columnist George Will estimated that Walmart was responsible for $200 billion in annual savings for American consumers.
Walmart's low prices help Americans stretch their paychecks. Photo: The Motley Fool.
More than 60% of Americans shop at Walmart each week, so the benefits of Walmart's low prices are widespread. Additionally, Walmart's move toward "Supercenters" that stock fresh food is helping to combat the problem of urban food deserts.
Walmart's dominance in some markets can negatively impact customers by driving competitors out of business and reducing choice. However, this potential harm is probably outweighed by Walmart's positive impact on the standard of living for tens of millions of working class and middle class families in the U.S.
Social responsibility at Walmart
While Walmart is a popular whipping boy for liberals, the company doesn't ignore issues of social responsibility. Walmart already relies on renewables for 24% of its energy needs -- it has the most solar power generation capacity of any company in the U.S. Walmart is in the midst of a campaign to grow its supply of renewable energy by 600% by 2020.
Walmart is also stressing diversity in its hiring practices. Last year, more than half of Walmart's hires were women, and nearly half of its new hires were minorities.
Walmart's "Buy American" campaign will give the U.S. economy a boost. Photo: The Motley Fool.
Another major Walmart initiative is its "Buy American" campaign. The company is working to jump-start U.S. manufacturing growth by pledging to buy an additional $250 billion in U.S.-made products during the next 10 years. This commitment will give a meaningful boost to the U.S. economy.
While Walmart's massive scale allows it to do a lot of good, the company has left a lot of carnage in its wake as it has expanded during the last several decades. New Walmart stores almost always take a toll on nearby small businesses. Replacing perhaps dozens of small businesses with a big-box store tends to damage the local community's social fabric.
Mixed grades
All in all, Walmart receives mixed grades from a stakeholder perspective. Investors can take comfort in the company's strong cash flow and return on invested capital, but Walmart's financial performance is not as good today as it was prior to the Great Recession.
Employees are probably the worst off of all stakeholders, as Walmart tends to be a demanding employer despite paying fairly low wages. That said, Walmart is far from the bottom of the food chain in terms of average wages. On the flip side, customers benefit from Walmart's penny-pinching, saving tens of billions of dollars annually.
From a social perspective, Walmart's growth has come at a cost to many communities, where local businesses have been unable to compete. However, Walmart is doing a lot to make up for this, by committing to buy more U.S.-made products, extensively hiring women and minorities, and dramatically reducing its energy consumption.
