Ed Lin
Companies can show confidence in their prospects in many ways, but $1 billion of stock repurchases certainly trumps a “cautiously optimistic” outlook. Among retailers, that’s a breathtaking amount of buyback activity.
That’s how much Walmart laid out to buy back shares in the fiscal second quarter ended July 26. What’s even more impressive is that the retailer didn’t significantly curb buying as the share price rose. Walmart paid $363 million in May for 5.8 million shares, an average price of $62.19 each, according to a form the company filed with the Securities and Exchange Commission. Then it paid $292 million in June for 4.4 million shares, an average price of $67.12 each, and paid $339 million in July for 4.9 million shares, an average price per share of $69.66. At the end of July, Walmart had $14.5 billion allocated for share repurchases.
Walmart stock has only climbed since then, setting record highs in the past week, and the prices the company paid to buy back shares look like bargains now. Shares set a record high of $81.02 in the past week, ending Friday at $79.06 for a year-to-date gain of 50% — more than two times the 20% rise in the S&P 500.
Walmart declined to say how many shares it had repurchased since the end of the fiscal quarter, but said in an emailed statement that “[s]hare repurchases are part of our diversified capital-allocation approach.” The company added that “our team evaluates the market opportunity for buybacks alongside other uses of our capital. Each quarter is different.”
The company’s buyback activity stands in contrast to the behavior of the other behemoth in retail, Amazon.com, which hasn’t repurchased any stock in 2024 through the end of June, even though it had $6.1 billion to do so.
Costco Wholesale is a tougher comparison with the other big retailers, since its latest reported quarter was the fiscal third that ended way back in the middle of May. Costco paid $53 million from Feb. 19 through March 17, the first month of the quarter, and paid $53 million again from March 18 through April 14, the second month, for 72,000 and 73,000 shares, respectively. The average share price was $742.12 in the first month, and $724.97 in the second. The last month of the fiscal quarter, April 15 through May 12, Costco paid $56 million for 76,000 shares, an average price of $732.82 each. The company ended the quarter with $3.1 billion left to repurchase stock.
Costco didn’t respond to a request for comment. Like Walmart, Costco stock surged to a record earlier this month, $923.83. Shares ended Friday at $906.98 for a year-to-date gain of 37%.
Robust stock repurchases aren’t a panacea for retailers. Signet Jewelers stock is in the red so far in 2024, and the diamond retailer aggressively stepped up buybacks in the second quarter ended Aug. 3 as the share price slipped.
Signet paid $3.9 million May 5 through June 1 for 37,700 shares, an average price of $102.59 each. Then as the average purchase price slipped to $96.09 each from June 2 through 29, Signet paid $8.2 million for 85,000 shares. The average purchase price then fell to $87.33 each from June 30 through Aug. 3, and the company paid $28 million for 318,050 shares. The quarter ended with Signet having $814 million left to buy back stock.
The company didn’t respond to a request for comment. Signet shares have gained since Aug. 3, ending Friday at $94.98, but still sport a year-to-date drop of 11%.
At least one retailer has ended stock repurchases altogether. Dollar Tree noted in its report for the fiscal second quarter ended Aug. 3 that it repurchased 750,000 shares for $90.8 million during the period. But the company bought all that stock in the first month of the quarter, from May 5 through June 1, when Dollar Tree paid $120.46 per share on average. It bought none in the subsequent two months of the quarter as the share price sank, despite having nearly $1 billion to repurchase stock. The parent of the Dollar Tree and Family Dollar chains saw shares end the quarter with an 18% drop.
Dollar Tree didn’t respond to a request for comment. Shares tumbled on Sept. 4, after the second-quarter report, and investors were spooked by disappointing numbers and a dimmer outlook. Shares have lost half their value so far this year, and ended Friday at $71.73 — about 40% lower than what Dollar Tree paid to buy back stock in May.
Inside Scoop is a regular Barron’s feature covering stock transactions by corporate executives and board members — so-called insiders — as well as large shareholders, politicians, and other prominent figures. Due to their insider status, these investors are required to disclose stock trades with the Securities and Exchange Commission or other regulatory groups.