Walmart Inc.’s U.S. ecommerce sales grew 97.0% in the second quarter of fiscal 2021, which ended July 31, as the ongoing coronavirus pandemic continued to drive consumers to buy online.
That surge in online buying included growth in groceries purchased online for home delivery or pickup at stores—each of which continued to experience all-time high sales volumes, Walmart reported, without providing exact figures.
In a Tuesday conference call with analysts, CEO Doug McMillon said the world’s largest retailer benefitted from “several tailwinds” affecting its Q2 performance. Those included the federal government’s $1,200-per-taxpayer stimulus checks, more people eating and entertaining themselves at home, and an increase in spending on homes and yards. However, “as the benefits from stimulus waned toward the end of the quarter, we saw our [comparable] sales settle into a normal range,” Doug McMillon said, according to a Seeking Alpha transcript.
“We are pleased with the progress we are making on Walmart.com. We had really strong sales growth and significantly reduced losses,” McMillon said during the call. He says the increased ecommerce sales have helped Walmart increase the size of its online marketplace, add new brands online and improve the product mix available on Walmart.com.
Walmart is No. 3 in the 2020 Digital Commerce 360 Top 1000.
Marketplace expansion and a membership service are coming
To help bring new merchants onto its marketplace and grab more of the pandemic-fueled surge in online shopping, Walmart in June teamed up with ecommerce giant Shopify Inc. Walmart plans to add 1,200 Shopify sellers this year. During the second quarter, sales on Walmart’s ecommerce marketplace experienced triple-digit sales growth on a year-over-year basis, said Brett Biggs, Walmart’s chief financial officer, during the Tuesday conference call.
Walmart’s marketplace already offers more than 75 million products. Third-party sales are typically more profitable as the sellers pay a fee to list items and often shoulder the delivery costs.
Also, Walmart expanded store pickup and delivery slots by nearly 30% since February and permanently increased its ship-from store-capabilities, Biggs said. According to a company presentation, Walmart currently offers about 3,450 pickup locations for online orders at its stores and offers same-day delivery from roughly 2,730 stores.
Compared with last year, Walmart’s grocery sales (online and offline) were up by about $3 billion in the quarter and more than $8 billion so far in 2020, John Furner, the retailer’s U.S. president and CEO said during the Tuesday conference call.
Walmart reportedly plans to introduce a subscription service to compete with Amazon.com Inc.’s Prime program. McMillon acknowledged that—but did not share details—during the Tuesday call.
“We think that assort breath and our ability to deliver with speed nationally combined with a few other benefits for customers will result in a compelling proposition. So, we have been moving towards a new membership launch. We’ll share more about that membership and timing when it’s appropriate,” McMillon said.
Early in 2020, Walmart rolled out Alphabot, an automated, 20,000-square-foot facility attached to a New Hampshire store. The system, designed by a Massachusetts startup called Alert Innovation, could make its grocery pickup service faster and more efficient. Furner said Walmart plans to expand that pilot into Texas over the next few months. Alphabot’s robotic carts quickly retrieve items and deliver them to employees at a picking station, who then pack and deliver the order to customers’ cars in the parking lot. Retailers call the process micro-fulfillment, and some analysts say it’s the most promising technology to hit food retail in years.
Congress adds uncertainty to future sales growth
Like other essential retailers that remained opened during the pandemic, Walmart saw a sales boost as U.S. consumers started to receive stimulus checks in mid-April, which they spent on everything from bicycles to board games while stuck at home. But as Congress continues to debate the size and timing of further stimulus spending after the initial round ended last month, Walmart’s lower-income customers could get squeezed.
“The outsized gains experienced over the last few months may be starting to ebb,“ RBC Capital Markets analyst Scot Ciccarelli said in a note to investors.
Last month, Walmart said it would close its stores on Thanksgiving Day, one of the busiest shopping days of the year. Its online store, which will remain open, will likely benefit from the decision.
For the second quarter of fiscal 2021, which ended July 31, Walmart reported:
- Total revenue was $137.74 billion, an increase of $7.36 billion, or 5.6% from $130.38 billion in the year-ago quarter. Excluding currency fluctuations, total revenue would have increased 7.5% to reach $140.20 billion.
- Consolidated net income for the quarter was $6.48 billion, up 79.4% from $3.61 billion a year earlier.
- Comparable-store sales, a key indicator of retail performance, grew 9.3% year-over-year for Walmart’s U.S. stores and 9.9% including Sam’s Club. Each percentage excludes fuel sales.
- Sam’s Club comparable sales increased 13.3% and its ecommerce sales grew 39% year over year. Reduced tobacco sales negatively affected comparable sales by approximately 390 basis points. Growth in membership income was the highest quarterly increase in more than five years. New member count increased more than 60% compared with last year, Walmart reported.
- Consolidated operating expenses as a percentage of net sales increased 42 basis points, primarily because of incremental expenses related to COVID-19, a business restructuring in the U.S. and a tax item.
- Consolidated gross profit rate increased 63 basis points primarily because of a shift in the mix of sales to higher-margin general merchandise categories, fewer markdowns and better margins on fuel, Walmart says. Spending associated with stimulus payments in the U.S. positively affected sales of general merchandise.
For the six months ended July 31:
- Total revenue was $270.50 billion, an increase of 7.2% from $252.34 billion in the year-ago period.
- Consolidated net income was $10.47 billion, up 40.4% from $7.45 billion a year earlier.
- Free cash flow was $15.39 billion, up 143.7% compared with $6.31 billion for the year-ago period.
Bloomberg News contributed to this report.
Percentage changes may not align exactly with dollar figures due to rounding.
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