The giant retailer's CEO attributed lower earnings to an unusual economic environment, including U.S. inflation levels. Walmart cut its earnings outlook for the rest of the fiscal year.

Walmart Inc.’s digital sales grew slightly year over year during the first quarter of the retail giant’s fiscal 2023, but at a slower rate than overall sales.

Walmart reported digital sales grew 1.0% year over year for the quarter ended April 30. Meanwhile, overall revenue grew 2.4% to $141.57 billion, from $138.31 billion for the year-earlier period. On a constant-currency basis, overall revenue grew 2.6% year over year, Walmart says.

On a two-year stacked basis — which compares the most recent sales with pre-pandemic levels — ecommerce sales growth was 38%. By the same measure, overall comparable sales grew 9.0%.

Comparable sales measure retail sales across stores and other sales channels that existed in the previous reporting period. In Q1, Walmart (No. 2 in the 2022 Digital Commerce 360 Top 1000) says comparable sales grew 3.0% year over year. The retailer also says it gained market share in the grocery sector but did not provide specific figures.

During a Tuesday conference call with analysts, Walmart CEO Douglas McMillon said the retailer has been “making progress on the ecommerce experience” as in-stock merchandise levels improve. He said Walmart continues to enhance its website and app experiences, and its delivery services have become more accurate and faster.

advertisement

Effects of losing a fulfillment center

In April, a fire destroyed Walmart’s ecommerce fulfillment center in Plainfield, Indiana, one of the retailer’s largest such facilities. The disaster hurt Walmart’s ecommerce operation, McMillon said.

“The buildings were destroyed, but thankfully and most importantly, no one was hurt,” McMillon said. “The loss did put strain on our system, however. The team quickly reacted to utilize our stores and spread volume to our other FCs to fulfil ecommerce orders. I’m proud of the team for moving so quickly to keep orders flowing to our customers.”

According to local news reports, Walmart informed Indiana officials that it would not reopen the Plainfield fulfillment center.

advertisement

While its top line grew, Walmart’s bottom line suffered. Consolidated net income was $2.10 billion, down 24.6% from $2.81 billion in the comparable period a year earlier. Consolidated operating income was $5.31 billion, a decrease of 23.0% from $6.91 billion a year earlier.

McMillion said in a statement that the decreased earnings were “unexpected” and reflected the unusual economic environment. That includes United States inflation levels, particularly in food and fuel. Those factors, he said, “created more pressure on margin mix and operating costs than we expected. We’re adjusting and will balance the needs of our customers for value with the need to deliver profit growth for our future.”

Full-year profit forecast cut

Walmart reported it expects operating revenue for FY 2021 to decrease about 1% compared with the previous year, in constant-currency terms. That was a notable change from February, when Walmart said it expected operating income to increase by about 3% compared with FY 2022.

advertisement

Walmart also expects net sales to grow about 4.0% in constant-currency terms. In February, Walmart expected net sales to grow about 3% in constant-currency terms. The retailer expects comparable sales growth of 3.5%, excluding fuel. In February, Walmart projected comparable sales growth of “slightly above” 3.0%, excluding fuel.

“There is a lot of uncertainty looking forward,” McMillon said to analysts. “Things are very fluid. I know you all are gathering information every day, and so are we. And as I talk to people across the country and across the world, there seems to be more uncertainty now in a very fluid environment, and so we’ll just deal with that, and we like the hand that we’ve got to play.”

McMillon also set the stage for more price increases, saying the company would seek to balance customers’ needs to deliver profit growth. His goal is to raise prices while staying below competitors and limiting the price bumps on entry-level food items.

advertisement

“Price leadership is especially important right now,” McMillon told analysts. He vowed to put the disappointing quarter “behind us and have a strong year.”

For the quarter ended April 30, Walmart reported:

  • Revenue of $141.57 billion, up 2.4% from $138.31 billion for the comparable period a year earlier.
  • Consolidated net income of $2.10 billion, down 24.6% from $2.81 billion in the comparable period a year earlier.
  • Consolidated operating income was $5.31 billion, a decrease of 23.0% from $6.91 billion a year earlier.
  • Walmart U.S. sales of $96.9 billion, up 4.0% from $93.2 billion a year earlier.
  • Walmart U.S. operating income of $4.5 billion, down 18.2% from $5.5 billion a year earlier.
  • Sam’s Club revenue of $19.6 billion, up 17.5% from $16.7 billion in Q1 in fiscal 2022.
  • Sam’s Club operating income of $800.0 million, down 35.3% from $1.2 billion in Q1 in fiscal 2022.

Percentage changes may not align exactly with dollar figures due to rounding.

Bloomberg News contributed to this report.

advertisement

Sign up

Stay on top of the latest developments in the ecommerce industry. Sign up for a complimentary subscription to Digital Commerce 360 Retail News.

Follow us on LinkedInTwitter and Facebook. Be the first to know when Digital Commerce 360 publishes news content.

advertisement