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Having a network of 4,400 stores where customers can pick up online orders proved again to be a boon for Walmart as the retailer on Tuesday reported U.S. e-commerce sales nearly doubled in the second quarter.
At a time when pandemic-weary customers are going to fewer retailers and visiting those they do patronize fewer times to reduce their exposure, Walmart has been able to capitalize on the interplay between its e-commerce and physical stores—its best defense against Amazon.
Comparable sales in the U.S. rose 9.3% in the three months ending July 31, fueled by grocery orders retrieved at stores and a better assortment of general merchandise. Walmart gets more than half of its revenue from groceries and is the largest food seller in the U.S. The online commerce helped the company overcome a 14% drop in shopper visits as customers consolidated trips, spending far more per visit, or shopped online.
And that helped Walmart get closer to reaching a long-held goal for CEO Doug McMillon: making e-commerce more profitable, with all the costs related to building the infrastructure and shipping expenses. Wall Street analysts had expected sales on Walmart.com to rise 60%, not double. The company has been looking to reduce its e-commerce reliance on grocery by adding more general merchandise, which offers greater margins.
“We’re pleased with the progress we’re making with Walmart.com,” McMillon said on a conference call. “The tailwinds we are experiencing are accelerating our progress to build a healthier e-commerce business as we add new brands and improve product mix.”
Shares were up 3% in premarket trading, putting Walmart’s stock on track to hit an all-time high.
The company got a big boost from government stimulus spending, and sales started to trend downward to more normal levels in July, when comparable sales rose 4%. And there are signs its momentum could slow further: Walmart executives said on the call that back-to-school sales have gotten off to a slow start, with laptops doing well but clothing and backpack sales weak.
“You’re not going to grow e-commerce sales 97% every quarter, and you’re not going to get the benefit of pent-up demand for many items,” says Brian Yarbrough, an analyst with Edward Jones.
The company’s second-quarter success wasn’t limited to its namesake U.S. chain: Sam’s Club’s, long a laggard to larger rival Costco Wholesale, saw comparable sales rise 13.3% and membership enrollments rise 60%. Internationally, however, Walmart’s revenue declined.
Globally, Walmart Inc. revenue rose 5.6% to $137.7 billion, while net income almost doubled to $3.6 billion, even as the retailer spent $1.2 billion on COVID-related expenses such as worker incentives and more intense cleaning of stores.
