Walmart’s lower than expected earnings pushed its stock down this morning (Aug. 18) when the retail giant reported its second quarter earnings. Consequently, Walmart cut their full-year guidance as a result of the earnings slump.
But it wasn’t all bad news.
During a time when most bricks-and-mortar retailers are struggling to get more feet through their doors, Walmart is still seeing an increase in traffic and sales. Sales increased 1.5 percent in the quarter, and foot traffic increased by 1.3 percent (up from last year’s Q2 traffic dip of 1.1 percent). Its Neighborhood Market stores also saw a strong growth of 7.3 percent, with its newest stores performing the best.
Net sales from the quarter rose 4.8 percent to $74 billion, up from last year’s Q2 of $70.6 billion. Revenue for the quarter hit $120.2 billion. Operating income for the quarter decreased 8.2 percent from the year prior to $4.8 billion. Sam’s Club revenue dipped .9 percent to $14.7 billion, and comparable store sales increased 1.3 percent.
On the international side, Walmart struggled on the sales side, decreasing 9.4 percent to $30.9 billion. Operating income for that sector also dipped to 14.2 percent to $1.28 billion.
“We continue to invest in our business to enhance the customer experience. Operating profit will be pressured for the remainder of the year, due to continued investments in store associate wages and additional hours, as well as headwinds from pharmacy reimbursements and ongoing shrink, primarily in Walmart U.S.,” Charles Holley, Walmart’s CFO said in the company’s prepared earnings release.
The bright spot in Walmart’s earnings, however — as it was during the retailer’s first quarter — was its eCommerce growth. ECommerce sales increased globally by 16 percent, and eCommerce GMV increased 18 percent.
“We’re pleased that the investments we’ve made are helping to improve our business. Even if it’s not as fast as we would like, the fundamentals of serving our customers are consistently improving, and it’s reflected in our comps and revenue growth. In this case, our desired changes require investments, which are pressuring earnings this year. We’re confident that our strategic plan will create robust sustainable growth for shareholder returns over time,” Doug McMillon, CEO of Walmart, said in the release.
Looking toward Walmart’s technology investments, the retailer also saw some milestones on the digital side, which including migrating all of its customers to the new cart and checkout technology platform. And through the implementation of responsive design, Walmart gave its digital platform an overhaul so that its site better adapts to the customer’s needs based on what device they are using.
“We are using eCommerce to bring both new customers to Walmart, as well as to deepen our relationship with our existing customers. On the largest day of our ‘Dare to Compare’ event, we saw more than double the number of new customers to Walmart.com than a typical day,” said Carol Schumacher, VP of Walmart’s Investor Relations, during prepared remarks in the earnings call this morning.
“We started rolling out a significantly-enhanced store search capability on mobile. We opened two new automated online fulfillment centers, each bigger than 20 football fields, and we have two more coming this quarter. These fulfillment centers are strategically located across geographies and will begin to serve our customers this holiday,” she later noted.
During the earnings call with analysts, Neil Ashe, President & CEO of Global eCommerce for Walmart, shared more about its eCommerce and mobile momentum — both on a domestic and International level.
“We are delivering important eCommerce capabilities around the world, and ultimately these capabilities are enabling experiences that impact the stores and clubs as well as eCommerce. Customers see us as Walmart and Sam’s Club, not a collection of shopping channels. We are delivering experiences on apps and sites and in stores and clubs that come together to differentiate us in the eyes of our customers and members. To remain in a leadership position, we must continue to invest in technology and people to deliver the customer and member experiences,” Ashe said.
The international investments in digital commerce continues with Walmart’s omnichannel efforts in the region with its most recent launch of “Walmart To Go” in 23 stores that allows consumers to order via the app and pick up in-store, or have the items delivered. He also rattled off a few major investments and how it’s paying off for eCommerce growth.
“We’re also testing ways to bring added payment choices and the convenience of mobile payment to our customers in our stores. …We increased our ownership of Yihaodian, our China eCommerce platform, to 100 percent. …In the second quarter, Yihaodian grew sales double digits, driven by strong growth in orders and continued improvement in conversion rates. Mobile contributed more than 55 percent of orders,” Ashe said.
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