On Tuesday a Walmart stock split by 3-for-1 was announced, when the retailer’s shares were barely below their all-time high. The additional shares will be given after the market closes on February 23 to stockholders of record on the preceding day, with Walmart’s stock due to begin trading on a post-split basis on February 26. The decision to split shares was motivated, in part, by the need to increase employee involvement in the company’s stock purchase plan.
The Walmart Stock Split was a strategic move
CEO Doug McMillon stated that the company deemed it an appropriate time to divide the stock, fostering stronger involvement from staff in the coming years. Following the announcement, Walmart’s shares rose 1% in extended session. As a major force in the retail industry, particularly as the largest supermarket in the United States, Walmart beat several competitors last year, increasing sales by 5% to $160.80 billion in the third quarter.
Employee-Focused Initiatives
The stock closed at $165.59 on Tuesday, approaching its all-time high of $169.94 achieved in November. Notably, this is Walmart’s eleventh two-for-one stock split, the most recent being in 1999. The strategic move is consistent with Walmart’s broader initiatives to improve employee benefits and loyalty, as evidenced by recent decisions such as increasing store manager wages to an average of $128,000 per year and revising the bonus program to allow managers to receive bonuses of up to 200% of their base salary.
Understanding Stock Ownership
Stocks reflect firm ownership, with each share representing a fraction of the company’s total value. Consider Walmart, which presently holds almost 2.7 billion shares. When firms like Walmart decide to split their stocks, as they intend to do next month, it simply changes the share count.
The 3-for-1 stock split all about
Stocks reflect firm ownership, with each share representing a fraction of the company’s total value. Consider Walmart, which presently holds almost 2.7 billion shares. When firms like Walmart decide to split their stocks, as they intend to do next month, it simply changes the share count.
Walmart’s 3-for-1 Stock Split Dynamics
Following the 3-for-1 stock split, Walmart will have around 8.1 billion shares, but the company’s worth stays unchanged. While investors would possess three times as many shares, each share will be worth roughly one-third of its original price, preserving total investment value. It’s vital to understand that the 3-for-1 Walmart stock split will not triple investors’ profits. Regardless of the change in share amount, the investment’s value remains generally stable. However, the logic for Walmart’s stock split is intriguing and deserves additional investigation.
Encouraging Full Ownership
Despite Walmart’s current stock trading at $166 per share, investors with less capital can still participate through fractional shares, permitted by various brokerages. Nevertheless, Walmart’s leadership underscores the significance of enabling associates to acquire whole shares rather than fractions. CEO Doug McMillon emphasized the company founder’s philosophy, stating, “Sam Walton believed it was crucial to maintain a share price range that made purchasing entire shares accessible to all our associates.”
What should investors do now?
While stock splits have recently made news and sparked investor interest, the planned Walmart stock split has the potential to foster a greater sense of ownership among its employees. Nonetheless, investors must stay focused on the key business dynamics. Walmart’s retail division stands out for its stability, with over 10,000 shops and a notable 4.9% increase in same-store sales in the third quarter of 2023, boosting trailing-12-month revenue to an all-time high. Beyond its strong retail presence, Walmart is quietly pursuing growth prospects that some investors may have overlooked.
Potential Growth Beyond Stock Split Buzz
Notably, the company is fast developing its advertising business, having formed a collaboration with The Trade Desk, an advertising technology company. Given Amazon’s $44 billion in advertising income over the last year, Walmart’s pursuit of a large advertising business has tremendous potential. These strategic business decisions, based on growth and diversification, should draw more attention from Walmart shareholders than the fleeting enthusiasm of Walmart stock split.