Walmart Inc.’s e-commerce sales nearly doubled in the second quarter, powering overall revenue gains that saw a U.S. comparable sales growth of 9.3 percent.
In a Nutshell: “The company’s net sales and operating results were significantly affected by a continuation of the global health crisis. Increased demand for products across multiple categories led to strong top-line and gross margin results,” Walmart said. “Spending associated with stimulus payments in the U.S. positively affected sales of general merchandise.”
During the morning conference call to Wall Street analysts, Walmart CEO Doug McMillon said the company has hired more than 500,000 new associates, globally. And he said the discounter remains committed to its Everyday Low Prices strategy, giving customers the best pricing possible without having to wait for a sale or promotion. With restaurants closed in hot spots or open with restrictions, families continued to prepare more meals at home, he said, which has buoyed Walmart’s business. Sales of pantry staples like cleaning supplies and paper goods surged in hot spots .
“While volatility in the supply chain has leveled, we see some categories return to in-stock,” he said. Walmart has continued rolling out its pickup and delivery services, “including Express Delivery where customers receive their orders in well under two hours.”
“Back-to-school is having a slower start than usual,” Brett Biggs, executive vice president and chief financial officer, said during the call, noting the company expects sales to be “choppy and come later than normal.” Much of that is due to lingering uncertainty over what the upcoming school year will look like. While Walmart is seeing robust activity in computer and electronic sales thus far, “basic school supplies, backpacks and apparel are [off to a] slow to start.”
Net Sales: For the quarter ended July 31, total revenue rose 5.6 percent to $137.7 billion, which includes a 5.7 percent increase in net sales to $136.8 billion. On a constant currency basis, net sales rose 7.6 percent to $139.3 billion. Net sales in its U.S. operations rose 9.5 percent to $93.3 billion. Results were helped by a U.S. comparable sales increase of 9.3 percent that was led by strong sales in general merchandise and food. Walmart also said e-commerce sales in the U.S. rose 97 percent, with strong results across all channels. In general merchandise sales, “[a]pparel was particularly strong with mid single-digit percentage growth across ladies, men’s and children’s,” the company said.
Walmart International sales fell 6.8 percent to $27.2 billion. Excluding foreign exchange, sales on the international front would have been up 1.6 percent to $29.6 billion.
Sales at Sam’s Club saw comp gains of 13.3 percent, while e-commerce sales rose 39 percent. The company said growth in membership income was the highest in more than five years, with new member count up more than 60 percent.
Walmart’s consolidated gross profit rose 63 basis points, mostly due to a shift in the mix of sales to higher-margin general merchandise categories, fewer markdowns and better margins on fuel. Operating cash flow for the quarter rose $7.8 percent to $19.0 billion.
Walmart said inventories were down 6.9 percent to $41.1 billion at the quarter’s end.
“Walmart’s Q2 performance, with an almost doubling of online sales, among a litany of expectations-exceeding results, continues to raise the bar for multi-channel retail as the company continues to leverage its massive store base to support its e-commerce initiatives,” said Charlie O’Shea, Moody’s vice president and senior credit officer.
“A recent proactive top-down restructuring with changes at the management and store levels has helped to further a strong omni-channel strategy, contributing to Walmart’s success,” added Sanjeev Sularia, CEO of Intelligence Node, a real-time retail intelligence platform.
Earnings: The company didn’t disclose net income in its early report of second-quarter earnings, but said diluted earnings per share were $2.27, an 80 percent increase from the same year-ago quarter. On an adjusted basis, EPS was $1.56.
Adjusted diluted EPS bested Wall Street’s consensus estimate of $1.25 on revenue of $135.5 billion.
CEO’s Take: “We remain focused on serving [our customers] well now and expanding our set of global capabilities to serve them well in the future,” McMillon said.