The company's stock hit a record high on Thursday, closing up about 7%.
Walmart Chief Financial Officer John David Rainey said in an interview with CNBC that Walmart's grocery business is experiencing a widening price difference between cooking food at home and buying food at fast-food chains and restaurants. He said that this is one of the factors that is pushing up the trend.
Additionally, he added, shoppers appreciate the convenience that Walmart offers. For the first time, the company's delivery business exceeded in-store pickup volumes, Rainey said.
“We have customers that are coming into our stores more frequently and we have new customers that we didn't have traditionally, and they're coming into Walmart, whether that's our online virtual store or our brick-and-mortar store. We have them in our stores,” Rainey said.
Here's how discounters reported in the first quarter of their fiscal year compared to Wall Street's expectations, according to a survey of analysts by LSEG.
- Earnings per share: Adjusted 60 cents, forecast 52 cents.
- revenue: $161.51 billion vs. $159.5 billion
Walmart's net income jumped to $5.1 billion, or 63 cents a share, in the three months ended April 30, from $1.67 billion, or 21 cents a share, in the same period a year earlier.
Sales increased 6% from $152.3 billion in the same period last year. This increase includes approximately 1% gain from additional sales days during the period.
The New York Stock Exchange welcomes Walmart (NYSE: WMT) today, Tuesday, January 16, 2024, in commemoration of the International CFO Summit. To mark the occasion, Executives John David Rainey, Vice President and Chief Financial Officer, and Chris Taylor, Vice President of NYSE Listing and Services, will ring his bell at the opening.
new york stock exchange
Walmart, the nation's largest retailer and private employer, is often considered the bellwether of the American economy. But the company generally fared better than other retailers during periods of inflation because it sells staples like groceries and has a value-oriented reputation.
Walmart US same-store sales increased 3.8%, excluding fuel. This industry metric includes sales for stores and clubs that have been open for at least one year. At Sam's Club, same-store sales increased 4.4% year over year, excluding fuel.
Walmart US e-commerce sales increased 22% year-over-year, driven by in-store pickup and delivery of online orders and the company's growing third-party market.
U.S. Walmart customers visited the company's stores and website more during the quarter, but spent about the same amount as a year earlier. Compared to the same period last year, transaction value increased by 3.8%, and the average number of tickets remained unchanged.
This week brought some positive news for Walmart and other retailers. Inflation eased in April, according to Labor Department data released Wednesday. The consumer price index increased by 3.4% from the previous year. This number is closely monitored to track the prices of goods and services at the register.
Walmart also showed signs of easing. CEO Doug McMillon said in an earnings call that the U.S. inflation rate rose only 0.4% in the quarter, with deflation in the mid-single digits for general merchandise and in the low single digits for groceries. He said it was inflation.
He said the company has been increasing its “rollbacks,” which are price reductions on certain products that it typically advertises on its website and in-store signage.
Still, the discounter is noticing the impact of inflation as shoppers choose to buy. Rainey said his customers' “wallets are still flat.” He said the company is seeing fewer purchases of general merchandise such as household goods and electronics as shoppers prioritize spending on food and health-related items, a trend the company has seen over the past several quarters. .
Still, “even low-income consumers seem to be holding up pretty well,” Rainey said. He added that sales in the miscellaneous goods category also increased year-on-year.
Walmart's April sales were weak, reflecting retail sales figures released Wednesday by the Commerce Department, but were offset by sales trends in other months of the quarter. Mr Rainey said April had been slow, Easter had moved into March and the weather had become cooler and wetter.
He said sales had picked up again in May and looked similar to the average for the first quarter of the fiscal year.
During the earnings call, McMillon highlighted Walmart's expansion of its online business and its success in getting more customers to buy non-grocery items. Groceries drive much of Walmart's business, accounting for nearly 60% of the company's U.S. sales in the most recent fiscal year, but they aren't as profitable as sales of items like clothing and cosmetics.
“We've been underselling general merchandise, especially apparel and home goods, for a very long time, probably forever. And the progress we're seeing now is driven by in-store renovations and e-commerce. I think there are,” McMillon said.
Walmart, seeking to appeal to younger, more affluent households, recently launched new private label grocery brands that include bolder flavors and plant-based items. We are also upgrading and modernizing more than 1,400 stores nationwide. The renovated store will feature retail offerings including Love & Sport, an activewear brand developed with fashion designer Michelle Smith and SoulCycle instructor Stacey Griffith, and Beautiful, a kitchen and home decor line developed with Drew. Some of the vendors' newer and more fashion-forward brands are on display. Barrymore.
Walmart is trying to boost profits beyond retail and fend off rivals like Amazon.
Emerging businesses such as advertising and its subscription-based membership program Walmart+ boosted profits in the quarter, contributing to operating profit growth that outpaced sales growth. The company's global advertising business grew 24% during the quarter, including 26% growth in the US segment.
The company's third-party marketplace is also a key driver of its business. Like Amazon, Walmart has grown its online business by welcoming sellers to its website and making more money by providing advertising and fulfillment services to those sellers.
In the U.S., Marketplace sellers grew 36% in the quarter, and Marketplace now carries more than 420 different products, McMillon said on the earnings call. In Mexico, the number of marketplace sellers increased by more than 50%, and the total number of products increased by nearly 80%.
Rainey told CNBC that one-third of Walmart's year-over-year increase in operating profit was due to these new businesses.
Walmart is cutting spending in some areas and investing heavily in others. Earlier this week, the company announced it would lay off and reassign hundreds of employees, including moving them to its headquarters in Bentonville, Arkansas. The move comes on the heels of the retailer closing Walmart Health Clinics, a network of doctor and dental clinics it had opened next to its stores.
Meanwhile, major retailers are pouring money into other initiatives. As Walmart chases advertising dollars, it announced in February that it would acquire smart TV maker Vizio in a $2.3 billion deal.
Rainey said Walmart's announcement this week to relocate hundreds of employees who currently work from home or in offices in Dallas, Toronto and Atlanta was not about cutting costs but about transitioning away from remote work. The moves also included layoffs. Walmart has not announced a five-day office week policy but said it prefers employees to work in the office most of the time.
“We strongly see the benefits of working together,” he said. “One of our competitive advantages is our culture, and it grows by being together.”
Walmart stock closed Thursday at $64, giving the company a market capitalization of $515.83 billion. As of Thursday's close, the company's stock had risen about 22% since the beginning of the year, outpacing the S&P 500's rise of about 11% over the same period.
