Dive Brief:
- Walmart’s total global revenue for the first quarter was $152.3 billion, up 7.6%, the retailer reported on Thursday. Operating income rose 17.3% to $6.2 billion, while Walmart’s e-commerce sales increased 27% thanks to strong performance in pickup and delivery.
- Comp sales for Walmart U.S. rose 7.4%, while net sales for the U.S. grew to $103.9 billion, up 7.2% from a year ago. The retailer reported $5 billion in operating income in the U.S., up from $4.5 billion a year ago.
- Although economic uncertainty remains a concern, the company raised its full-year guidance on Thursday. Walmart now expects its consolidated net sales to rise about 3.5%.
Dive Insight:
President and CEO Doug McMillon said a higher mix of sales in food and consumables negatively affected gross profit. However, McMillon told investors and analysts that strong expense management helped grow profit ahead of sales. McMillon said Walmart continues to gain market share in the grocery category, “including with higher income and younger shoppers.”
Sam’s Club’s U.S. member count and the club’s Plus member penetration hit all-time highs in the first quarter. Excess inventory is declining and in-stocks are improving, McMillon said. CFO John David Rainey also told investors and analysts that consumers have responded positively to Walmart’s newly remodeled Super Centers.
Rainey said if the consumer environment tightens further, the company can lean in on its value proposition for everyday items and its omnichannel offerings. And if the macro environment improves, “we have the opportunity to sell more general merchandise and improve our margin mix through both our first-party stores and e-commerce and third-party marketplace businesses,” Rainey said.
The new store formats feature more brand shops, digital displays, wider aisles and updated fixtures. “We’re very encouraged by the early reads on customer response to these initiatives and we plan to update 300 stores with these features this year,” Rainey said. Walmart had about 3,500 Supercenters in the U.S. and 600 Sam’s Club stores as of Jan. 31.
"Walmart's solid quarter underlines the view that the big-box retailer, which gets more than half of its revenue from groceries, is better suited for the current economic climate than some of its industry peers, such as Home Depot and Target,” Jesse Cohen, a senior analyst at Investing.com, said in emailed comments to Retail Dive.
In addition to its substantial amount of grocery revenue, GlobalData Managing Director Neil Saunders said Walmart is doing well because the cost-of-living crisis has driven more people to discount and big-box retailers. Higher-income shoppers are now increasingly turning to Walmart for groceries and household items.
“The good news here is that new shoppers seem to be sticking with Walmart — at least for the time being — but the less good news is that their activity is mostly confined to staples and necessities, and few are crossing the aisle to shop general merchandise,” Saunders wrote in emailed comments.
Also helping Walmart’s numbers is the growth of its peripheral services, like ad platform Walmart Connect.
Later this month, Walmart plans to host a shareholder week at its corporate headquarters in Arkansas. During that event, McMillon said participants will have an opportunity to tour a recently opened market fulfillment center. The market fulfillment centers are part of a larger initiative to build a more connected and automated fulfillment and supply chain network.
“It’s about creating a supply chain that’s better, not just bigger,” McMillon said. "We're excited about how our new capabilities will help our associates by making some of our more physically demanding jobs into more rewarding higher skilled career paths."
