Walmart rode another eCommerce blowout and strong performance in its grocery business to a second quarter that exceeded all expectations and showed its continued growth during the pandemic.
Announced on Tuesday (Aug. 18), Walmart’s Q2 results showed a U.S. comp-store sales increase of 9.3 percent over Q2 2019 and a 97 percent bounce in eCommerce. The eCommerce performance comes on the heels of a 74 percent jump in Q1. Digital sales rose from 180 basis points in Q1 to 600 basis points in Q2.
While grocery wasn’t broken out in the company’s financials, CEO Doug McMillon called it out as a contributing factor to the comp sales bounce, with an average ticket size that grew 27 percent over 2019. If the grocery category continues on its current trajectory, it will add $8 billion in sales to the company’s bottom line by the end of the year.
Sam’s Club results were flat, with a 1.3 increase in per-store sales and no increase in eCommerce.
During the company’s post-announcement earnings call, executives said that the quarter benefited from spending stemming from government stimulus packages. In addition to grocery, strong performances came from electronics and connected home products. Specific grocery numbers were not called out, other than a growth rate in the high single digits.
It became apparent during the call that the recent restructuring of the company, complete with some unspecified job cuts, has been executed with the aim of unifying eCommerce and physical sales, and that Walmart is “laser-focused” on honing a stronger digital presence.
“We're pleased with the progress we're making on Walmart.com,” said McMillon. “We had really strong sales growth and significantly reduced losses. The tailwinds we're experiencing are accelerating our progress to build a healthier eCommerce business as we add new brands, improve product mix, grow the marketplace and achieve more fixed cost leverage. The stores and online merchant teams are now integrated. And we believe we will benefit from that change going forward.
“Improvements in contribution, profit and reduced operating losses are really good to see,” he continued. “We've made several structural changes within Walmart U.S. during the quarter as we continue on our path to transform into an omnichannel organization. The changes were made to increase innovation, speed and productivity.”
One of the more anticipated events, the subscription-based Walmart+ service, was not given a launch date. However, the earnings call showed that the planning around the service is heavy on grocery delivery and exclusive offerings.
“It's important that we first acknowledge that our strength in the entire business is offering a wide assortment of everyday low-priced products across multiple channels, and that won't change … with membership,” said Walmart US EVP John Furner on the call. “We want to remove friction from customers’ lives and make it easier to access those assortments at everyday low prices throughout the multiple channels … in addition to the delivery component, we're confident that's a great base of an offer.”
The company raised some concerns regarding Q3. Back-to-school sales, according to Walmart, are off to a slow start. Combine this with a possible absence of an additional stimulus package, and the company could have a hard time reaching the heights it has achieved during the pandemic so far.
“Back-to-school is just one component of the quarter,” McMillon said. “And we'll have to sort out how customers want to shop as we go, but we think our inventory is well-positioned. And we'll just react location by location. I don't think we have a lot of liability exposure there. The sales exposure will be mixed as we go through the quarter and manage other parts of our business.”