Walmart Q2: sales surge continues as US ecommerce business almost doubles

Stewart Samuel
Program Director - Canada
@RetailAnalysis

Date : 18 August 2020

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

Walmart's key numbers

  • Walmart's total revenue in Q2 increased by 5.6% to $137.7bn
  • Operating income increased 8.5% to $6.1bn
  • Sales in its US stores increased by 9.5% to $93.3bn and by 8.8% to $16.4bn at Sam’s Club
  • US comp store sales increased by 9.3%, with average ticket up 27.0% while transactions fell 14.0%
  • Sam’s Club comp sales were up 13.3% (ex-fuel)
  • International net sales decreased by 6.8% to $27.2bn, up 1.6% on a constant currency basis
  • US ecommerce sales increased 97%

US: pandemic tailwinds

Walmart US benefitted from government stimulus payments, eating at home and consumers spending time at home and investing in their spaces (underpinned by dollars usually spent on travelling), during the quarter. Customers continued to consolidate their trips, with strong demand for TVs, computing, entertainment and sporting goods. The retailer also saw continued high demand for cleaning supplies and experienced stocking-up trends in some areas of the US. Sales were negatively impacted by restricted trading hours and inventory challenges. Food sales increased high single-digits with broad-based strength across most categories.

US: ecommerce sales surge supports path towards profitability

The significant growth in ecommerce in the US contributed around two-thirds of the segment’s comp sales growth. The retailer sees the pandemic as validating its omnichannel strategy, which has accelerated progress towards building a more profitable ecommerce business. Changes in the product mix, strong marketplace sales (supported by new seller tools) and leveraging its fixed costs, helped to reduce losses. Walmart continues to focus on operational improvements, with structural changes made to support the transition to an omnichannel organisation during the quarter. It also plans to expand its automated micro-fulfillment pilot with Alert Innovation into Texas in the coming months, which will help boost capacity and efficiency.

International: sales pressured by closures and currency

Walmart delivered positive comp sales in seven of its 10 key markets. Sales were negatively impacted by government-mandated closures in India, Africa and Central America. Comp sales growth was strongest in Canada, up 14.0%, followed by China, up 8.7% , Mexico, up 6.3%, and the UK, up 3.8%. Ecommerce sales were also strong across all these markets, with growth ranging from 98% to 217% .

Sam’s Club: strength in membership

Sam’s Club saw the highest quarterly increase in membership income in more than five years, as the new member count increased more than 60%. Transaction growth and average ticket size accelerated through the quarter. Membership is also in focus at the core US stores business, with plans to launch a new programme in the coming months. Few details were shared on this, although it is expected to have a strong delivery-based component, along with additional benefits. This will enable Walmart to build stronger customer relationships, learning how to serve them more efficiently and deliver an improved experience.

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