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Walmart Beats Profit Estimates As Online Sales Hit Record On Pandemic Boost

Published on Aug 18 2020 2:29 PM in Retail tagged: Trending Posts / Walmart / USA / Online Sales / GlobalData Retail / Second Quarter Results

Walmart Beats Profit Estimates As Online Sales Hit Record On Pandemic Boost

Walmart Inc posted its biggest-ever growth in online sales on Tuesday as shoppers placed orders for everything from electronics and toys to groceries from the safety of their homes amid the COVID-19 pandemic.

Shares of the company rose 6% as the near-doubling of online sales in the second quarter helped it trounce Wall Street expectations for quarterly profit and same-store sales.

The results showed that the unprecedented spike in demand seen by big-box retailers at the peak of the lockdowns has remained strong even as restrictions ease, with shoppers using their stimulus checks to shop for discretionary items like sneakers and clothes.

'Consequence Of External Factors'

Managing director of GlobalData Retail, Neil Saunders, commented,  "As robust as these results are, they are more a consequence of external factors than a function of things Walmart has done to engineer growth.

"This means that as the impact of enhanced unemployment benefits and stimulus checks fades, Walmart is likely to see performance drop back. Our data already show a modest slowdown in non-food which could accelerate as more core customers feel a squeeze on their household finances."

Bright Spot

For Walmart, its online business has been a bright spot, seeing rapid growth as it expands its same-day delivery options and pick-up services.

Walmart's US e-commerce sales rose 97% in the quarter.

"Some of this is coming from the expansion of the marketplace, which is helping Walmart broaden its appeal to new demographics. A lot is also the result of more groceries being bought online; here we maintain our view that Walmart is besting Amazon when it comes to both core shopper share and metrics like repeat visits and the use of services such as collect from store," Saunders explained.

"While there is no doubt that online grocery has a negative impact on margins, Walmart has managed to offset this from higher general merchandise and marketplace sales. However, if sales in these areas start to soften, Walmart’s profit could be crimped as we move into the quarters ahead."

Sales at US stores open at least a year rose 9.3%, excluding fuel, in the quarter ended 31 July. Analysts had estimated a gain of 5.73%, according to IBES data from Refinitiv.

Operating income rose 8.5% to $6.1 billion (€5.12 billion) in the quarter, while adjusted earnings per share of $1.56 also topped the average estimate of $1.25.

Total revenue rose about 5.6% to $137.74 billion (€115.69 billion).

Change In Shopping Pattern

Elaborating on the company's performance, Saunders said, "Behind the solid sales increases, there is a remarkable shift in the way consumers are shopping. In store, visits are down but average transaction values are up as shoppers consolidate their purchasing into fewer trips to limit their exposure to external spaces.

"While this has worked out favourably for Walmart, which has always been a destination for big shopping trips, we believe it is losing some share of smaller top-up shops which are increasingly going to more local outlets such as dollar and convenience stores as consumers try to stay closer to home."

News by Reuters, additional reporting by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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