#986 John Pompliano On How Walmart Took Over The Retail Space

In this conversation my brother, John Pompliano, breaks down the business of Walmart and their recent earnings report. Is Walmart in trouble with their sales? John explains Walmart's history, why the founders who aren't involved anymore so wealthy, and the future prospects for this behemoth retail business. ======================= FTX. US is the safe, regulated way to buy and sell Bitcoin and other digital assets. Trade crypto with up to 85% lower fees than top competitors. There are no fixed minimum fees, no ACH transaction fees, and no withdrawal fees. FTX. US is also the only leading exchange that supports both Ethereum and Solana NFTs. Download the FTX App today and use referral code “Pomp” to earn free crypto on every trade over $10. The more you trade, the more you earn. ======================== Brave Wallet is the first secure crypto wallet built natively in a web3 crypto browser. No extension required. Store, manage, and grow your portfolio, get NFT & multi-chain support, and more. Download the Brave privacy browser at brave.com/Pomp, and click the wallet icon to get started. ======================= The Pomp Podcast is powered by BetOnline.ag, the world's largest sports betting, casino, poker and horse racing website that accepts cryptocurrency for wagering. BetOnline.ag gives you the ability to use Bitcoin and more than a dozen altcoins to make deposits and withdraw your winnings. There are no crypto transaction fees, and processing is instantaneous and secure. Visit https://promotions.betonline.ag/pomp and use PROMO CODE: POMP100 to receive a 100% matching bonus on any crypto deposit. BetOnline.ag is available in nearly every country around the world, making it the top global gaming destination for crypto users. =======================

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. In this episode, John Pompliano, my brother and I, we sit down and we talk about Walmart and their recent earnings report. It's a fascinating business, employs 2.3 million people around the world, and their sales, they may be in trouble. We wanted to get to the bottom of what's going on with the business. How did they actually build this thing? Why are the owners, who aren't involved anymore, so wealthy? And what exactly are the future prospects? The fascinating conversation that breaks down a lot of data and a lot of various insights. Hope that you enjoy these episodes. Before we get into it, I first want to talk about our sponsors. This episode is brought

• 0:43Anthony Pompliano?

  to you by FTX US. FTX.us is the safe, regulated way to buy and sell Bitcoin and other digital assets. You can trade crypto with up to 85% lower fees than top competitors. There are no fixed minimum fees, no ACH transaction fees, and no withdrawal fees either. FTX.us is also the only leading exchange that supports both Ethereum and Solana NFTs. Download the FTX app today and use referral code Pomp to earn these free crypto on every trade over $10. The more you trade, the more you earn. Go download the FTX app today and use referral code Pomp. Today's episode is brought to you by Brave. Brave Wallet is the first secure crypto wallet built natively in a Web3 crypto

• 1:26Anthony Pompliano?

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• 2:10Anthony Pompliano?

  icon to get started. Again, go download brave at brave.com/pomp and click the wallet icon to get started. Today's episode is brought to you by bet online.ag bet online.ag is the top spot for all of your sports betting casino and poker needs. It's available on your computer, your tablet, or your mobile device. Bet online accepts Bitcoin and more than a dozen altcoins to make deposits and withdraw your winnings. There are no crypto fees, processing only takes minutes, and transactions are 100% anonymous and secure. Head over to bet online.ag and sign up today to receive a 100% crypto bonus on your first deposit. Just use ARC promo code POMP100

• 2:52Anthony Pompliano?

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• 3:32Anthony Pompliano?

  personal opinion. This podcast is for informational purposes only. We now have the man, the myth, the legend, John Pomp. What up, buddy? What up? We talking about money? We talking about money? That's why you're here because we're talking about money. That sweatshirt looks fire, by the way.

• 3:47Speaker 01

  Yeah, it's pretty cool. Yeah, that is pretty nice. Thanks for the compliment. All right. Yeah, of course. Walmart is what we're going to talk about today. Why are you interested in Walmart? What grabbed your attention about this? So Walmart's been in the news because of their earnings last week. But then I saw a stat that I thought was pretty interesting about Walmart and the Walton family in general. So the Walton family still owns 47% of Walmart. And since Walmart does a dividend, that means they generate about $3 billion annually just from owning Walmart's stock. Let me say that again. The Walton family gets almost $3 billion annually. Just from what their their dad did.

• 4:28Anthony Pompliano?

  So there's, there's two things that are really interesting about this. One is that the Walton family still owns 47% of Walmart. In today's day and age, the founder retaining 47% of a company this large.

• 4:41Speaker 01

  Yeah.

• 4:41Anthony Pompliano?

  Is almost unheard of.

• 4:43Speaker 01

  There's only like, there's only two or three others in the world.

• 4:45Anthony Pompliano?

  If I remember correctly, Jeff Bezos owns like 12 to 16% of Amazon, somewhere in that range.

• 4:49Speaker 01

  Yeah, but that's nowhere close to 47.

• 4:51Anthony Pompliano?

  Of course. So like, he owns double-digit percentage, but a low double-digit percentage where's Wal- the Walton family still owns almost 50% of Walmart itself. The second thing that's fascinating, $3 billion in annual dividends is a ridiculous number.

• 5:05Speaker 01

  I mean, when you own that much stock, though, they're just playing by the rules. They say, we have a dividend and we're paying ourselves the dividend.

• 5:09Anthony Pompliano?

  Yeah. I mean, that's crazy. All right. So talk to us about Walmart in the background.

• 5:14Speaker 01

  All right. So Walmart was founded by Sam Walton. He had three kids and I'm going to talk a little bit about how he got to be able to continuously own that much percentage. So he started, he was in World War II, he came back, he started some five-and-dime stores, so like five-and-ten stores.

• 5:31Speaker 01

  Got to those like 16 locations and then he opened up Walmart in 1960, or 1983. Or no, excuse me, 1962. And then he just, he just progressed, right? His strategy is basically to go, he was really cost efficient. And he was like, we're going to go into these small towns, we're going to build out stores in these small towns. So then when big time retailers come into play, we already have the market, right? There can't be a million discount stores in the area, you can only have so much. He focused a lot on the merchandise and the cost of the merchandise against Amazon, which focuses obviously a lot on the operations, the convenience, the hey, let's get to you really, really quickly. And Amazon, or and Walmart has kind of tried to build that into what they already care about their merchandise.

• 6:13Anthony Pompliano?

  So in 1962, he already had 16 stores. I mean, he was moving.

• 6:18Speaker 01

  Yeah, but he had 16 stores of a different brand. So he had, he had five-and-dime and then he created the first Walmart.

• 6:23Anthony Pompliano?

  Okay. And then at what point do we get the first Sam's Club? Because Walmart created Sam's Club.

• 6:29Speaker 01

  Yeah. I did not know that. That Walmart created Sam's Club basically to say, we already do low-priced things to the consumer, why don't we just do it wholesale? Why don't we just do it more of the Costco model and they started in 1983.

• 6:40Anthony Pompliano?

  Okay.

• 6:40Speaker 01

  They now have over almost 50 million members.

• 6:43Anthony Pompliano?

  Almost 50 million members at Costco today.

• 6:45Speaker 01

  Or at Sam's Club. Costco has like 100 million because they focus on that business.

• 6:50Anthony Pompliano?

  Yeah, but still they've got 50% of the number of subscribers of Costco. And it literally was like, hey, let's just start this kind of on the side almost, right? And it grew into this massive thing.

• 6:58Speaker 01

  Yeah, and he did a good job of like separating the businesses from like the US Walmart to international Walmart, which is owned by a bunch of its joint ventures and subsidiaries. And then they have their e-commerce business that has ramped up a ton over time. But they they just do a really, really good job. And one thing I want to note is the reason that they retained all the ownership was their dad set up a partnership. So he had them all as basically like a partnership as the owner of Walmart. And the way this worked was he was able to pass down all the percents almost tax free, right? So he gave each of his, he has three sons and one daughter. He gave each of them 20% of what he owned. And then him and his wife kept the remaining 20% to split between the two.

• 7:36Anthony Pompliano?

  So he split it five ways, his 47% interest. But what's interesting about this is one, the naming. So Walmart Walton, right? So Walton's Mart, but then Sam's Club, Sam Walton, Sam's Club. Okay, got it. And so he created two brands, the ownership he puts into a partnership. And then he basically just said, hey, my wife and I will keep 20% or one fifth. And then each one of my kids gets an equal percentage to us as this continues. And this is why so many Waltons are actually on the Forbes 400 billionaire list.

• 8:10Speaker 01

  Yeah, and to be fair, if you look it up, a lot of them don't do anything with Walmart, right?

• 8:14Anthony Pompliano?

  Yeah, of course, they just have ownership.

• 8:16Speaker 01

  Yeah, one of the sons tragically passed away. Another daughter is into like the art and museums and things like that. So they don't like operate the business day to day.

• 8:25Anthony Pompliano?

  All right, so now talk to me about why is this company worth so much? Like in terms of, I know they've got some real estate. Let's maybe start there in terms of like the real estate strategy.

• 8:32Speaker 01

  Yeah, they started with the small towns, right? So they realized that going after a major city will go, we're from Raleigh, North Carolina, right? So you use Raleigh as an example. Inside Raleigh, there are other thrift stores, there are other grocery stores, there's a million other stores. But in the In the suburbs right outside, they realized they're like, there's these towns that have 5,000 people like Kmart's. Kmart was going after towns that had 50,000 plus people, right? Because they're like, hey, people are already there. Let's just build a store and then we can go ahead and get market share that way. But he was like, why don't we build the market ourselves? Why don't we go ahead and take over this market? And then as people go into that area, move in the area, the area becomes more affluent, then we'll be the number one player there. And that's what they did really, really well is they put it on the suburbs.

• 9:12Speaker 01

  And you can see, like most retailers, like most brick and mortar retailers, they have a ton on the eastern side of the United States, but they are obviously all over both the United States and globally.

• 9:23Anthony Pompliano?

  Yeah. And then another thing that they did in building this empire, so this idea of being merchandise driven, not operations driven. What does that mean?

• 9:30Speaker 01

  Yeah. So being merchandise driven is one, they were really cost effective, right? So they wanted to bring down their costs as much as possible. Sam Walton was huge through all the research I did. Sam Walton was huge on just like, look, a dollar that we save gets passed on to the consumer, right? They, they were just, let's just keep, keep, keep going and keep getting that cost down. And then, yeah, look, they have a variety of products as well, right? So if consumer electronics is down, they sell groceries. If groceries is down, they sell whatever. But what we saw last week with their earnings was just consumer spending is down.

• 10:03Anthony Pompliano?

  Yeah. And then last thing I think that's kind of part of the secret ingredient, it's not really secret, right? But is this idea of Walmart treats their employees from a very kind of family oriented standpoint. Like, hey, we want to take care of our employees. Why do they do that?

• 10:17Speaker 01

  Yeah. Sam Walton, when he started the company, one, he, they called their employees associates, right? Because he was like, we want them to feel like ownership in this business. He's very open with his employees about profits, how much it costs, like everything that a normal company would probably shield from the lower level employees or associates in this case. Sam was very open about it and he said, if you give people a sense of ownership, essentially they're gonna, they're gonna work harder at it and they're gonna do a better job.

• 10:42Anthony Pompliano?

  Yeah, it's pretty crazy. Talk to me about the current business now. How many stores do they have? How many countries are they in?

• 10:48Speaker 01

  They have almost 11,000 stores. There's actually split, it's about 50% domestic, 50% international. And then they have like 600 Sam's Club. So that's not a big portion of it, but the other stores are like 50/50.

• 11:00Anthony Pompliano?

  11,000 almost.

• 11:01Speaker 01

  They, they employ 2.3 million people. They're the largest employer in the world.

• 11:06Anthony Pompliano?

  The largest employer in the world is Walmart and they have 2.3 million people, 11,000 stores or so. And how many countries?

• 11:13Speaker 01

  Uh, 28, I think.

• 11:15Anthony Pompliano?

  28 countries?

• 11:16Speaker 01

  Yeah.

• 11:16Anthony Pompliano?

  Jesus Christ. I mean, that is just absolutely insane. How many customers on like a weekly or annual basis?

• 11:23Speaker 01

  So this is, this is a, this stat actually blew my mind and I'm not sure how it compares to other people, but I just think this is absolutely nuts is each week approximately 230 million customers either enter their store or visit their websites. So

• 11:37Anthony Pompliano?

  Each week?

• 11:38Speaker 01

  230 million customers each week visit the 11,000 stores and clubs.

• 11:43Anthony Pompliano?

  Dude, that's the equivalent of two thirds of the United States population. Every single week?

• 11:50Speaker 01

  Yep.

• 11:51Anthony Pompliano?

  That's a number that if it was every year, you'd be like, damn, that's a lot.

• 11:53Speaker 01

  Yeah. People don't realize how big Walmart is and like the, like, no one can compete with Walmart right now. With the model that they already have set up, Amazon is, is, uh, Amazon's doing a different model, actually. So they're not trying to compete in my mind.

• 12:06Anthony Pompliano?

  All right. So I think we've got the chart of the stock price. Uh, it's at like 120 bucks or so.

• 12:12Speaker 01

  Yeah.

• 12:12Anthony Pompliano?

  Uh, today, and it was, you know, sub $50 in 2000. So it's just gone on, you know, just an epic run. Uh, what's driving a lot of this? A $330 billion market cap company?

• 12:25Speaker 01

  Acquisitions, uh, throughout the last 20, 30 years, right? They bought, um, was it, uh, jet.com in 2016 for like $300 million, $3 billion, $3 billion, right? Um, and then just acquisitions throughout the way and building their brand. They have, I think, 46 different like brands under their, um, like Walmart. So they just, they've done a really, really good job of just slowly progressing along the way, keeping the cost down for consumers, not overreaching. Um, they were pioneers in the sense of their logistics. So they used laser, um, laser technology to be able to move boxes around the warehouse a lot sooner than other people did. Uh, and then that is why they've just been on the forefront of things. They were a little late, I think, to the e-commerce game, but then once they bought jet.com from Mark Lor for $3 billion,

• 13:10Speaker 01

  they, uh, they just ramped it up. They shut down jet.com and said, let's just redirect it to Walmart.

• 13:14Anthony Pompliano?

  Yeah, there's four other charts that I know that you gave us that I think are really interesting. So first is Walmart's net income worldwide, going all the way back to 2010, now till 2022. And what you can see here is they did 13, almost 14 billion dollars in net income.

• 13:33Anthony Pompliano?

  Is what they're tracking to back in 2020, they did 15.2 billion in net income, which sound like a massive number. But back in the early 2010s, they were doing like 16, 17, almost 18 billion dollars in net income. This is a business that is robust. And it is just sitting there kind of 15 plus billion in net income. That's not revenue, that's net income.

• 13:56Speaker 01

  Everyday low prices, volume adds up.

• 13:59Anthony Pompliano?

  All right, then we've got this next one here, and this shows that kind of the financial information.

• 14:06Speaker 01

  This does a good breakdown, I think, of separating their businesses as a whole. Walmart US, Walmart International, and then Sam's Clubs as well. And you can see that Walmart is obviously, it's the driver for their business.

• 14:17Anthony Pompliano?

  In 2021, let's look at that, net sales in 2021. Walmart US did 93 billion. Walmart International did 27 billion and Sam's Club did 16 billion. So combined 137 billion in net sales. But what is fascinating is that 93, 27, and 16 billion coming from those three. Obviously Walmart US is much bigger. I'm actually surprised at how much Sam's Club does in comparison to Walmart International. 27 billion being Walmart International sales versus Sam's Club 16 and a half billion. That's not nearly as big of a difference as I would have thought.

• 14:58Speaker 01

  No, and it's almost like people forget, people don't think about Sam's Club and go, oh, Walmart, Walmart, right? They just think Sam's Club, right? And for the accounting department at Walmart, they're like, no, we own Sam's Club. Let's make sure to add that revenue in because it's a giant revenue for the amount of stores that they have.

• 15:12Anthony Pompliano?

  Got it. All right, then we've got the same store sales change from the prior year. And what it looks like is that we actually are seeing drops on a quarter by quarter basis in same store sales. Is that something that people are concerned about?

• 15:29Speaker 01

  Yeah, I think just generally consumers have been spending less. The pandemic was a massive hit to people's wallets and then obviously stimulus checks being boosted up in late 2020 and early 2021 grew their, had people spending, but now you can see that people are going back to not spending as much because they don't have that extra excess cash.

• 15:48Anthony Pompliano?

  Got it. And then the last one we have is Walmart US e-commerce sales and the change from the prior year. And right now their e-commerce sales are basically flat year over year. It used to be, you know, in 2018, 2019, 2020, we're between 40 to 60% year-over-year growth. It spiked in 2021 to almost 100%, almost doubled, but now it's basically flat. So some of that's obviously going to be base effect, right? It grew so much last year, but still not exactly what you want to see if you're an investor having flat growth year to year. And so talk to me, I guess, as the last thing around like this inventory problem. It seems like they've got lots of inventory and sales are down a little bit right now. And so people are a little like, hey, what's going to happen to Walmart?

• 16:29Speaker 01

  Yeah, I think the big, the big takeaways from their earnings last week were that inventory on a year-over-year basis was up about 33% because they kind of almost over-ordered supply chain woes. They just didn't know what was going to happen. So they're like, let's just get all our products in. The worst thing we can have is someone order a product and let's not have it to sell it to them. But now they have 33% increased inventory. Sales are actually down and you can imagine what that's doing, right? You can't just have inventory sitting there, especially if you're expecting a average or down year, right? They're not expecting to have an explosive year where it's 10%, 20% growth. They're expecting 2% growth. So that inventory, that 33, 34% increase in inventory is a big deal. And then, like I said, stimulus checks are over. So people just aren't spending. They're not,

• 17:11Speaker 01

  they're not doing what consumers normally do and what Walmart wants them to do.

• 17:15Anthony Pompliano?

  Yeah, it's absolutely fascinating to kind of think about how these businesses evolve over time, right? Especially when a company like Walmart's been around for, you know, 50 years or whatever it is, and they've been able to navigate so many different macroeconomic, you know, changes. Obviously, they literally were started before the internet, right? In terms of the mass consumer using the internet. And so they've been Able to navigate e-commerce changes. They've been able to navigate good times, bad times, whatever. My general take here is that they'll probably be okay. But you never know.

• 17:49Speaker 01

  Getting to think that the only companies that survive are the ones that have the ability and the desire to adapt to different changes, right? They were late to e-commerce, but then they went full-blown in and said, let's ramp that up. That's a good business model. And I got one thing for someone in the comments. I was talking about their employees and how they treat their employees. I do not know. I do not work at Walmart, so I'm not there on the ground level. But I do know that they have set up multiple things to have their employees college-paid-for, fast-tracked management where they can make over $200,000 a year within a one-and-a-half, two-year timeframe. So that's all I know about their employees.

• 18:23Anthony Pompliano?

  They seem to have some systems in place.

• 18:25Speaker 01

  Yeah.

• 18:25Anthony Pompliano?

  All right. Where can we send people to find you on the internet?

• 18:28Speaker 01

  If you don't know, now you know. Go follow me on Twitter right now. Don't even just hit Command T on your computer. Go follow me on Twitter right now.

• 18:35Anthony Pompliano?

  At John Pomp.

• 18:36Speaker 01

  At John Pomp. Oh, you can see it on the screen. John Pomp.

• 18:40Anthony Pompliano?

  All right. I appreciate you coming on. We'll definitely keep doing more of these deep dives. I learn something every time we do one. And it's fascinating to think about various businesses and how they're kind of navigating good times, bad times, and what's working. So to see Walmart e-commerce year-over-year sales is near 0% growth, kind of crazy. But then you see, oh, last year they almost doubled. And so there's base effect, there's all that going on. So I appreciate it. All right. Thank you, John.

• 19:03Speaker 01

  No problem.

• 19:05Anthony Pompliano?

  Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you subscribe on Apple, Spotify, or your favorite podcast player. And if you're looking to try to transition to get a new job in the Bitcoin or crypto industry, we've got you covered. Head over to pompscryptocourse.com. We've developed a curriculum with the top teams across the industry. It's a three-week intensive training program with over 50 events packed into that three-week time period. Go to pompscryptocourse.com to learn more, and I'll meet you guys for the next episode.