Walmart Q1: omnichannel strength supports business through coronavirus

Date : 19 May 2020

Stewart Samuel

Program Director - Canada

We review Walmart's first quarter results and its outlook as the business adapts to the new trading environment.

Walmart's key numbers

  • Walmart's total revenue in Q1 increased by 8.6% to $134.6bn
  • Operating income increased 5.6% $5.2bn
  • Sales in its US stores increased by 10.5% and by 9.6% at Sam’s Club
  • US comp store sales increased by 10.0%, with average ticket up 16.5% while transactions fell 5.6%
  • Sam’s Club comp sales were up 12.0% (ex-fuel)
  • International net sales increased by 3.4% to $29.8bn, up 7.8% on a constant currency basis
  • US ecommerce sales increased 74%

Source: Walmart

Framework to support decision making

The impact of the coronavirus (COVID-19) pandemic dominated Walmart’s Q1 results. The retailer focused on the five priorities it has used to frame and support its decision making. These include supporting its associates, serving customers, helping others, managing the short term and continuing to drive the business strategy forward.

US: changing shopping patterns

As expected, Walmart saw a significant surge in demand related to the pandemic, with customers consolidating store shopping trips, basket size increasing, and more purchases being shifted to ecommerce. The retailer saw shopping patterns change through the quarter. Comp sales grew 3.8% in February, before surging to 15.4% in March, and after slowing in the first half of April, re-accelerated towards the end of the month as government stimulus money made an impact.

US: phases of growth

Through the quarter, the sales mix changed continually from the shift towards food and consumables during the stock-up phase to puzzles, games, home office, sewing machines, and products related to improving indoor and outdoor living spaces during the second phase of entertaining and educating at home. Relief spending due to government stimulus led to more demand in discretionary categories including clothing TVs, video games, sporting goods and toys. Its current priority is improving product availability and rebuilding inventories.

US: pushing ahead with omnichannel strategy

Customers embraced Walmart’s ecommerce options during the crisis, with its omnichannel approach resonating strongly. New customers into its pickup and delivery business increased four-fold, with the retailer working hard to increase fulfillment capacity. This has included rolling-out ship-from-store to almost 2,500 locations. Walmart also saw its third-party marketplace grow ahead of its core ecommerce business, supporting its long-term goal to improve channel profitability. The retailer also announced that it is discontinuing the Jet.com brand as the Walmart brand continues to gain traction across all customer groups.

International: China led growth

In line with the US, Walmart saw similar trends in its international markets, with nine of 10 markets delivering positive comp sales. Growth was driven by China, with comps up 11.7%, Mexico up 10.8%, Canada up 8.5% and the UK up 3.5%. In China, where omnichannel sales increased more than 200% during the crisis, all stores are open. However, the bounce-back in China may be relatively stronger than what it may experience in the US due to different policies at national, state and county levels, particularly around testing and contact-tracing.

International: further volatility expected

However, with April falling into Q2 in all international markets, excluding Canada, the retailer pointed to more challenging results to come. The impacts of the pandemic, and their timing, are differing by markets, leading to a high level of volatility. This has included in India with Flipkart, where it has been limited to selling key items, and in Africa where up to a quarter of stores have seen temporary closures.

Positioned for strength in an omnichannel world

However, the business reaffirmed its long-term strategy of providing multiple choices for customers. Although its financial position remains strong it has withdrawn its guidance for the full year. Walmart highlighted the uncertainty related to the duration and intensity of the crisis, the impact of stay at home orders and economic stimulus and employment trends and consumer confidence. However, while the short-term may be challenging, it believes it is positioned for strength in an omnichannel world, with opportunities to emerge from the crisis having gained loyalty and market share.

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