Walmart Grows Industrial Footprint As Competitors Contract
The largest retail company in the U.S. is expanding its industrial portfolio in an effort to raise profits and boost delivery speeds, even as some competitors take the opposite approach.
Walmart said in its third-quarter earnings release Thursday it is expanding its supply chain through new distribution and fulfillment centers as the company saw revenue increase by 5.2% to $160.8B. It has also made plans to modernize and invest in other distribution centers already in its portfolio, CoStar reported.
The company said it operates nine regional distribution centers and has another six under construction. The new facilities, including a 1.5M SF high-tech center that opened last quarter, are planned to double the storage capacity and expand its next-day or two-day shipping services to nearly 90% of the country.
"Over the next several years, we expect margins to move higher as we modernize our supply chain and scale higher-margin growth initiatives," Walmart Chief Financial Officer John David Rainey said on the firm's earnings call. "We've made good progress on both during the quarter. We continue to deploy capital to build technologies and optimize our next-generation supply chain with automation and productivity benefits starting to appear in our results."
Although the company, which has 4,616 stores and 599 Sam's Club locations throughout the U.S., is expanding its footprint, the retailer also warned of cautious consumers during the upcoming holiday shopping season, prompting shares to fall 7.7% on Thursday, Reuters reported.
Unlike Walmart, other retail chains are hitting the brakes on their warehouse expansions, part of an overall cooling of the industrial market. Walgreens and Target have begun to invest more in in-store fulfillment as they shift away from large warehouses and distribution centers.
E-commerce giant Amazon in recent months has continued the industrial pullback it initiated last year, putting a handful of new spaces on the sublease market. It listed more space for sublease in October than any other month since September 2022.