Author: Zhuang Lijia, Zhitong Finance
Image source | pexels
Zhitong Finance App has learned that Morgan Stanley, in a research report released recently, noted that the overlap between the member bases of Walmart's Walmart+ and Sam's Club is limited, creating a huge opportunity for bundled membership sales and potentially lifting total spending per member over time. October survey results showed that about 26% of respondents hold a Walmart+ membership, about 31% hold a Sam's Club Net membership, with about 12% holding both, and about 55% holding neither.
The opportunity to raise spending per member through membership bundling
Morgan Stanley's membership survey shows that among Walmart+ members, about 45% also hold a Sam's Club Net membership — about 30% with a regular Sam's Club membership and about 15% with a Sam's Plus membership. Conversely, among Sam's Club Net members, about 38% also hold a Walmart+ membership, including roughly 35% of regular Sam's Club members and about 46% of Sam's Plus members.
Overall, October survey results show that about 26% of respondents hold a Walmart+ membership and about 31% hold a Sam's Club Net membership, of which about 22% hold a regular Sam's Club membership and about 8% a Sam's Plus membership. The data therefore indicates a certain degree of overlap between the two member bases, but not complete overlap.
Morgan Stanley took a closer look at the potential opportunity in the membership business. About 55% of respondents said they hold neither a Walmart+ membership nor a regular or Plus Sam's Club membership; about 12% hold both. In addition, about 14% hold only Walmart+, about 14% only a regular Sam's Club membership, and about 5% only Sam's Plus. The high share of respondents without any membership means Walmart has broad room to win new members, while those holding only one membership are natural targets for cross-selling.
Cross-selling opportunity
Morgan Stanley's survey shows that the roughly 55% of respondents holding neither a Walmart+ nor a Sam's Club membership provide a large pool of potential customers for acquiring new members; at the same time, the about 14% holding only Walmart+ and the about 19% holding only a regular or Plus Sam's Club membership are natural targets for driving cross-brand membership conversion.
Meanwhile, the survey shows that about 12% of respondents already hold both memberships, indicating a considerable share of households already carry both. Although management previously said the overlap between Walmart+ and Sam's Club member bases is low, the bank's survey shows about 38% of Sam's Club Net members also hold Walmart+, including roughly 35% of regular Sam's Club members and about 46% of Sam's Plus members.
As a result, Morgan Stanley treats these survey results as an initial read on the potential opportunity and will further assess consumer awareness of bundled membership offers in subsequent surveys. Overall, the findings reinforce the value proposition of integrating Walmart's membership business.
A note on the survey results. Morgan Stanley's communication with management indicates that the overlap between Walmart+ and Sam's Club member bases is very low. This further supports the bank's view that bundling the two membership programs could act as a potential catalyst for cross-selling and for raising spending per member.
As this is the first time Morgan Stanley has included questions on member-base overlap in its periodic survey, the bank still needs several more rounds of results to refine the data and apply any adjustment factors that may be needed.
On ratings, Morgan Stanley rates Walmart "Overweight" with a target price of $125. That target price corresponds to roughly 36.8 times the bank's fiscal 2029 earnings per share (EPS) forecast of $3.39 on a combined P/E basis, or about 18 times its fiscal 2029 EBITDA forecast of around $56.5 billion on an EV/EBITDA basis.
The 36.8x P/E is above Walmart's historical 10-year average of 21x. Morgan Stanley, however, considers the valuation premium justified, as Walmart has completed its transformation from a physical retailer that was gradually losing competitive ground to Amazon's rise into a company capable of disrupting the e-commerce and supply-chain industries.
