Walmart muscles strongest sales growth in 10 years
- Walmart's U.S. comparable sales grew 4.5% in the second quarter — the strongest growth in over 10 years — led by grocery, apparel and seasonal categories. E-commerce sales grew 40%, up from 33% in the previous quarter. Sam's Club comparable sales rose 5%, its strongest growth in six years, the company said in a press release. The positive results caused shares to rise more than 11% in pre-market trading.
- Net sales at Walmart International rose 4% to $29.5 billion, showing positive comparable sales in the four largest markets. Total Walmart revenue increased by 3.8% in the quarter to reach $128 billion.
- Electronic sales were the strongest in four years thanks to an increased assortment, and warmer weather boosted traffic in seasonal, lawn & garden and apparel. Food and consumables performed strongly too, with growth in fresh food categories. The company revised its fiscal 2019 guidance from a 2% growth in comparable sales across stores to a 3% rise at both Walmart U.S. and Sam's Club stores.
This was the quarter Walmart needed — and one that CEO Doug McMillon said signifies Walmart is now "moving with more speed." To him, the positive results were driven by four strategic objectives:
Make shopping easier for busy families.
Change the way Walmart works (focus on diversity and inclusion, digital mindset and fighting bureaucracy).
Operate with discipline.
Be the most trusted retailer. (According to the company, a survey of 6,600 Americans showed that Walmart ranked number one as the most ethical brand that came to mind for respondents.)
Under Marc Lore's e-commerce leadership, digital sales have been a major priority. In the first three quarters of the last fiscal year, digital sales rose 63%, 60% and 50%, sequentially. But fourth-quarter results stalled comparatively, increasing just 23% and spurring a 10% drop in the company's stock price in just one day. Ambitious growth projections for 40% growth on the year were further called into question last quarter when the company reported e-commerce sales growth of just 33%.
Overall, analysts from Cowen believe the company will hit its digital goals and is encouraged that the company is making long-term competitive moves against Amazon. According to the latest Cowen Consumer Tracker, 80.5% of survey respondents visited a Walmart store or its website, compared to 79.9% last year. Visits accelerated for the third consecutive quarter and turned positive for the first time on a year over year basis in five quarters. Shopper overlap with Amazon also declined for the first time since Cowen began the survey in 2012. Customer satisfaction improved in the quarter, too, according to Cowen.
Moody's Lead Retail Analyst Charlie O'Shea said it was a "banner quarter" for Walmart by most counts. "Margins continue to reflect investments in price, people, stores and technology, though decreases were fairly well-contained, and market share continues to grow," he said. "The food business continues as a bright spot, with rapid rollout of in-store pickup well underway, and product delivery expanding as well."
Grocery pickup is now available at more than 1,800 stores, and the company said it is on track to reach 40% of the U.S. population with grocery delivery by the end of the year.
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