Walmart’s future is outside its 4 walls

Walmart currently operates nearly 5,000 stores in the U.S. And there’s a Walmart within 10 miles of 90% of the population.

The retail giant has a massive brick-and-mortar footprint—but the company’s dependence on those stores as its chief money-maker might be changing.

That’s according to comments made Tuesday by Walmart CFO John David Rainey at a Raymond James investors conference in Orlando.

“Today, the vast majority of our overall profits are attributable to in-store, brick-and-mortar in the U.S.,” Rainey said, according to a transcript from financial services site Sentieo. “If you fast forward five years, we are much less dependent on that as an income stream than some of these other faster-growing parts of our business.”

Instead, Walmart will increasingly look to the fees it charges third-party sellers on Walmart.com, along with its increasingly lucrative retail media arm as chief revenue streams. Expanding e-commerce channels is also central to Walmart’s strategy going forward, Rainey said.

“Delivery from a store has almost tripled in volume over the last two years,” he said. “And, in the month of January, it was well over $1 billion for us. Now that tells you that consumers—our value proposition is resonating with them. And again, that convenience is something that appeals to every income demographic. And, so, we’re certainly leaning into this area with a lot of the investments that we’re making.”

Walmart’s grocery dominance is not slipping, Rainey noted, saying, “We’ve also seen a notable shift in terms of share gain for us in grocery.”

Much of that growth continues to come from shoppers who make more money, with about 50% of that share gain coming from higher-income consumers in the last quarter.

“In the prior two quarters, that was north of 70%,” he said. “So really excited about our value proposition resonating with them.”

But grocery is a low-margin business. Which is one of the reasons Walmart is looking to expand into other revenue streams, including retail media. Advertising margins, Rainey said, are typically in the 70% to 80% range.

Walmart’s advertising platform, Walmart Connect, grew more than 40% during the fourth quarter, the company reported last month.

“And so this, again, is a faster-growing part of our business with a higher margin, which changes the composition of our P&L over time,” he said. “Our customer base covers a lot of America. And so, people want to partner with us.”

Bentonville, Arkansas-based Walmart last month reported that its U.S. same-store sales rose 8.3%, or 13.9% on a two-year stacked basis, during the quarter ended Jan. 27. Grocery sales grew in the “high teens” during the period.