Things have warmed up for Walmart over the winter.
The retail landscape had been littered with disappointing earnings reports, worries over the impact of a cross-border trade war between China and the U.S. and impending interest rate boosts.
And yet. Walmart on Tuesday (Feb. 19) managed to buck its brethren and post one of the best holiday quarters (which ended in January) in roughly 10 years.
Stock pops aside — yes, the shares were up low single-digit percentage points in intraday trading — the data tell a story, one where the company-specific tale is a strong one, eyeing eCommerce and omnichannel efforts as a long-term undertaking and transformation.
It seems the Commerce Department’s 1.2 percent retail sales decline seen in December for the overall industry might be in the rearview mirror.
Comps Beat Projections
Comparable store sales for Walmart were up 4.2 percent in the quarter, which included that month, and the tally trounced what the Street had been expecting, by about 100 basis points.
As had been noted by management and the economic data points mentioned above: The U.S. consumer is resilient.
The fact remains, too, that one firm’s loss can be another’s gain, and, for Walmart, some traction was made through a toy story — specifically, where the company grabbed hearts and minds and wallets from Toys R Us shoppers. Said Walmart CFO Brett Biggs, “there was share in the toy market” to be had, and the firm had spotlighted mid-single digit gains in general merchandise offerings, tied in part to home and apparel goods.
In addition, eCommerce sales gained 43 percent as the company gained momentum for online grocery and delivery options, which have been expanded to embrace home delivery and curbside delivery.
One-offs included what management said was the benefit of an early distribution of food stamps (SNAP) payments that gave the company a 40-basis tailwind for comp sales results.
With a nod to eCommerce, the company said that grocery pickup is a feature at 2,100 Walmart locations and that delivery is available at 800 locations. Looking ahead, through the end of fiscal 2020, the company said it will have pickup in place at 3,100 locations and delivery at 1,600 locations. CEO Doug McMillon said the company has found that among omnichannel offerings, companies that shop in-store and online spend twice as much as other customers.
During the conference call with analysts, the online segment for the company at large garnered attention. Management said efforts are ongoing to find the particular mix of offerings that will help drive margins.
Said the CEO, the effort is “taking longer” than had been estimated in the past, as Walmart seeks to build apparel, home and hardline offerings across the digital space that encourage repeat visits (and, of course, repeated transactions from consumers). Management called out other offerings within the digital umbrella, such as Jet, as getting traction with younger buyers.
The online efforts, ever heated against Amazon, mean Walmart’s strategy anticipates losses accruing in the eCommerce unit, amid infrastructure and staff build-outs. The battle is joined, yes, and per PYMNTS’ own proprietary analysis, Walmart accounts for roughly 8.9 percent of consumer retail spending and 2.8 percent of all consumer spending in the U.S. In contrast, Amazon accounts for 6.4 percent of retail spending and 2.1 percent of all consumer spending in the U.S.
Total Walmart sales in the U.S. were $90.5 billion, up 4.6 percent, with comp sales up 4.2 percent, traffic up 90 basis points and the comparable ticket up 3.3 percent. The company said eCommerce offered up 180 basis points to that comp sales growth in the U.S.
Breaking down segment performance, grocery sales were up mid-single digit percentages, health and wellness was up low single digits and general merchandise up mid-single digits.
The company said Walmart International sales totaled $32.3 billion, up 2.7 percent, with positive comps in three of its four largest markets, spanning Mexico, the U.K. and Canada. China was down slightly, due in part to a calendar shift in the Mid-Autumn Festival and a slower economic environment in that country. Walmex was the fastest-growing segment at 3.8 percent growth year over year.
With a nod toward India, and new eCommerce rules that took effect where the government has curbed Walmart’s ability to sell its own product through affiliates there, the CFO said there had been “some” disruption, but not enough to impact overall business trends. As has been widely reported, Walmart had bought the bulk of Flipkart last year for $16 billion. CFO Biggs said the country is an encouraging market given its size and “low penetration” of eCommerce.
Walmart also said Sam’s Club comp sales were up 3.3 percent, and comp traffic was 6.4 percent. eCommerce sales attributable to Sam’s Club were up 21 percent and private-label sales reached a 26 penetration rate, the company said in its materials.
Earnings per share were $1.41, where $1.33 was expected. Revenues of $138.8 billion topped $138.7 billion projected by the Street.
The company also repeated full-year guidance that had initially been broadcast back in October, where comp sales growth for U.S. locations should be between 2.5 percent to 3 percent.