Walmart case study: SSSG strengthens during periods of consumer stress

We examined Walmart's (WMT US, Not rated) same-store sales growth (SSSG) trends across the past two decades to assess the company’s resilience during periods of constrained consumer power, as evident in softer wage growth and elevated food inflation. Our analysis identified three key periods that warrant attention: the 2008 global financial crisis, the 2020 COVID-19 pandemic, and the 2022 post-pandemic inflationary period following the Russia–Ukraine conflict (Fig. 1).

Interestingly, Walmart's SSSG tended to outperform during these periods, compared with periods where wage growth significantly exceeded food inflation, such as 2015–2019 and, to a lesser extent, 2023–2025. This suggests that spending on essential goods, particularly groceries, tends to be more resilient when real wage growth (defined as wage growth less food inflation) approaches zero or turns modestly negative.

When wage growth comes under pressure while food prices continue to rise, consumers typically reallocate spending toward necessities and reduce discretionary purchases in order to maintain household budgets. As the largest grocer in the US, Walmart has historically benefited from this trade-down effect, attracting both value-conscious consumers and high-income shoppers seeking lower prices.

Notably, Walmart's gross profit margin (GPM) has remained relatively stable at 23–25% over the past two decades (Fig. 2), despite grocery's contribution to revenue increasing from ~45% of sales twenty years ago to ~60% of Walmart US sales in FY2025. Given that groceries structurally carry lower margins than general merchandise, such stability suggests that Walmart has been largely successful in offsetting margin dilution through pricing actions and operational efficiencies. In other words, while consumers increasingly shifted their spending toward essentials during inflationary periods, Walmart was generally able to pass-through a meaningful portion of higher input costs without materially compressing profitability.

Implication to Alfamart and Alfamidi

Alfamart (AMRT IJ, Buy) and Alfamidi (MIDI IJ, Buy) have started to increase product prices by 2-10% across select categories, reflecting the impact of higher oil prices. The last time we saw a similar magnitude of price increases was during 2021-2022, when both the companies had delivered 6-9% SSSG, above their typical mid-single-digit growth rate. At that range of price increase, AMRT and MIDI were able to pass-through higher costs without materially impacting volumes, resulting in stronger sales growth.

Meanwhile, wallet-size growth, measured by average wages multiplied by the number of employed workers, has slowed to its weakest pace in the past decade, excluding the COVID-19 period (Fig. 5). We believe this may drive consumers to prioritize spending on daily essentials over discretionary items.

Historically, Walmart's strongest SSSG periods have coincided with periods of softer real income growth and elevated food inflation, suggesting that spending on necessities tends to remain resilient as consumers reallocate budgets towards essential categories. Given AMRT's heavy exposure to the grocery and daily-needs categories, we believe the company could similarly benefit from such spending reallocation, while ongoing price increases provide additional support to SSSG.

Maintain Buy on AMRT and MIDI

We maintain our preference for minimarket operators over discretionary retailers amid the current challenging macroeconomic environment, as we believe manageable product price increases should provide modest support to minimarket SSSG growth this year.

Separately, the government has reduced its Merah Putih Village Cooperatives rollout target by 50% to 40k locations (LINK), underscoring a more measured and pragmatic approach to the program's implementation. The revision suggests that the government is prioritizing the long-term viability and quality of the cooperatives, rather than pursuing rapid expansion or adopting policies that could undermine privately-owned minimarket operators. While we continue to see limited competitive advantages for these cooperatives relative to the well-established minimarket operators, the slower-than-expected rollout could nonetheless ease competitive concerns and serve as a modest positive catalyst for the sector.

We have a Buy rating on AMRT with a TP of IDR2,530, pegged to a 2026F P/E target of 27.5x; for MIDI (Buy), our TP of IDR530 is pegged to a 2026F P/E target of 19.2x. Currently, AMRT/MIDI trade at 15.6x/ 12.0x 2026F P/E (EPS: IDR92/ IDR28).

 

Fig. 1: Walmart’s quarterly y-y SSSG and the US food inflation adjusted wage y-y growth - Walmart's SSSG tended to outperform when adjusted wages were under pressure compared with environments where wage growth significantly exceeded food inflation

 

Fig. 2: Walmart’s trailing 12M quarterly GPM trend – at 23-25% over two decades despite increase in grocery revenue mix from ~45% to 60% in 2025

Fig. 3: Walmart’s quarterly y-y SSSG and US food inflation y-y

Fig. 4: Alfamart’s quarterly y-y SSSG and Indonesia food inflation y-y – Strong historic correlation at 0.7x

Fig. 5: Wallet size y-y growth (average wage x number of workers) – slowest growth ex-COVID period

Fig. 6: AMRT – P/E band

Fig. 7: MIDI – P/E band

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Jody Wijaya (jody.wijaya@verdhana.id)

Sandy Ham (sandy.ham@verdhana.id)

Nayla Yasmin (nayla.yasmin@verdhana.id)

Samuel Christian(samuel.christian@verdhana.id)