COST - Walmart+ is a secret weapon for the world's largest retailer

2023-03-07 08:13:15 ET

Walmart ( NYSE: WMT ) could have a underappreciated weapon with its growing Walmart+ paid subscription service that is challenging retail peers for consumer dollars.

Walmart+ now has 18.4M members, according to an estimate from Morgan Stanley. The Walmart+ tally is modestly higher from the last survey by the firm, but below the all-time high mark of 18.6M members in September of 2022.

The U.S. household penetration rate for Walmart+ is 14.3%. Of note, Walmart+ membership gains have been slower and choppier since the middle of 2021. "Still, over that time period membership has grown by a cumulative ~5m members, equating to ~250k net new members per month on average," noted analyst Simeon Gutman.

Gutman and team estimate the total addressable market for Walmart+ is 30M to suggest much more growth could be ahead.

For investors, Morgan Stanley thinks an area of potential value unlock in Walmart ( WMT ) stock could come from increased disclosures on Walmart+ members, which most other consumer peers with membership programs quantify including Amazon ( AMZN ), Costco ( COST ), BJ's Wholesale ( BJ ), and Mister Car Wash ( MCW ).

Sector watch: Costco is likely to raise membership fees this year - what does it mean for the stock?

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