Is Sam’s Club Being Too Optimistic About Its Growth Potential?

Sam's Club is speeding up its expansion plans.

According to CNBC, Walmart owned Sam's Club plans to open 15 clubs per year and renovate all of its approximately 600 locations in the U.S.

cEO Chris Nicholas said last Wednesday at a recent investor day.

With a boost from these new locations, Sam's Club aims to double its membership over the next eight to 10 years.

Nicholas also said in an interview with CNBC, Nicholas said he's confident that demand for Sam's Club will hold up even if the economic backdrop gets worse.

In fact, he said that the Warehouse House Club's focus on saving customers money may gain even more relevance.

Chris, do you share our friend at Sam's Club, Chris Nicholas's optimism about its store expansion plans?

Oh, a hundred percent.

One hundred percent.

I do.

Okay.

I'm.

Yeah.

Why?

I, I do.

Well, I think there's three reasons, like when I get down to it.

So first, Sam's Club's been on a massive winning streak already.

So in its most recent quarter, Sam's Club delivered a 6.8%.

I looked this up in a 6.8% sales comp, which excludes fuel for those that were curious.

And, and that's amid macroeconomic conditions that have not been great.

I mean, let's call it like it is.

So yeah, that's one second point.

Sam's Club has also seen explosive growth both online and in store.

E Commerce sales were up 24% in the same quarter and the use of its Scan and Go shopping app, which we've talked about a lot on this show, hit an all time high during the same period.

As we've talked about with many executives, one in three shoppers at Sam's Club regularly use Scan and Go.

That's one in three.

So I'm going to go out on a limb here, but I'm guessing that Costco's mobile app usage in store is nowhere near that high.

Like I've, I've never even seen anyone personally using the Costco app and there's.

No reason, there's nothing in there that, that makes sense to use.

I mean there's no, like, it's not couponing.

Like, it's just, it's no, it's showing.

It's more of a prep for the Costco shopping trip than it is if.

You'Re even using it for that.

Right.

So like, and so those are my first two points.

But the third point is Sam's Club is also winning with young people.

So is Costco too.

But Sam's Club has reported record highs in membership numbers and renewal rates, with particularly strong growth among gen Z at 63% growth over the last two years and millennials at 14% over the last two years.

So the combination, I think of digital first of, of a digital first shopping experience and a growing percentage of younger people shopping at stores means that Sam's Club is positioned to create the most one to one personalized shopping experience out there.

Yeah.

So from a retail media perspective, Sam's Club, by way of Scan and Go app, has basically a virtual menu board to serve up advertisements to one third of its shoppers.

And that number's only going to grow because they're only getting younger.

And so yes, I'm buying into this because Costco can't touch that.

You know, it's MC Hammer Costco.

You can't touch this.

So, you know, so I'm by, I'm also buying whatever Chris Nicholas is throwing down.

I, I like Chris Nicholas.

He seems like a really smart dude, really shrewd dude.

So, yeah, I'm all in.

What about you though?

You're probably all in too, because you love Sam.

Yeah, I mean, I, I think I, I love Sam's Club.

I still think that Sam's Club has an awareness problem and I think that's where they need to focus because they need to start drawing customers away from Costco.

I think you, you ask the average millennial right now in the US or, or Gen X individual in the US Right now, and I think that they lean towards Costco because it's, you know, it's what they know it, they are seeing more things on their social feeds and Sam's Club is working on doing this and I think that it's a great way, these remodels are a great way to help them gain relevance with that audience.

I think it's a matter of getting people in the door and once they get somebody in the door, they use the Scan and Go app.

They see how much simpler and more convenient and better laid out that Sam's Club shopping experiences, I think that they'll be hooked.

It's just going to be getting people into those stores.

So for me it's less about, you know, whether I'm in on the remodels.

I think that's a great, a great move, but I just think it's going to be focusing again on some of those other components of how you get people to, to kind of convert and walk through the door.

And one reason I think that that could help them is tapping into their partnership and their relationship.

With Walmart plus plus.

And with Walmart, because I think that once you start to get more of those shoppers from these demographics into the Walmart universe and you start to see, like, oh, my, I get fuel discounts at Sam's Club, like, you start to pull people into that.

And then I think it's all boats under the Walmart umbrella rise.

And I think Sam's Club increases and Walmart plus increases as a result.

So I think there's a lot of good to come from this.

It's.

It's not just going to be in the remodels.

I think there's a lot of other outside work to do, but I think Sam's Club is in a really position to just leapfrog over Costco in the coming years.

Yeah, 100%.

Yeah.

And, and you know, I've been a long a proponent of that idea of, of merging those two membership programs.

And, you know, I'm curious to see if they ever pull the trigger on that.

But.

Yeah, and I forgot, too, they have the whole, like, automated checkout process too, where you go through the, the whatever.

What, the archway, you know, like.

So, yeah, they got a lot of cool things going and I, you know, 15 stores, I think.

Yeah, let's be bullish about that.

So.

Yeah.