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Dive Brief:
- Walmart’s second quarter consolidated revenue rose 4.8% year over year to $169.3 billion, the retailer said in a Thursday earnings announcement. Total operating income was $7.9 billion, up 8.5%. U.S. net sales rose 4% to $115.3 billion from a year ago.
- Global e-commerce sales grew 21% and rose 22% for the company’s U.S. business segment. U.S. comparable sales, excluding fuel, rose 4.2%, which Chief Financial Officer John David Rainey credited to strong traffic and unit growth across stores and digital.
- Walmart also issued Q3 guidance and raised its full-year outlook. The retailer forecasts third-quarter net sales will increase 3.25% to 4.25%. Full-year net sales are now expected to increase 3.75% to 4.75%, up from the prior outlook of a 3% to 4% increase.
Dive Insight:
Despite softening trends elsewhere in retail, Walmart isn’t “experiencing a weaker consumer,” CEO Doug McMillon said on a call with analysts as the company reported Q2 performance that beat analysts’ expectations. The retailer is also continuing to compete on price, he said, with more than 7,200 rollbacks in the U.S.
TD Cowen analysts led by Oliver Chen said in a note that general merchandise, which comprises about 30% of Walmart’s mix, was a bright spot, returning flat comps for the first time after nine quarters of declines. Walmart’s value, digital and delivery convenience, and practical adoption of artificial intelligence “is yielding attractive consistency,” Chen said.
McMillon said during an earnings call that pickup is growing faster than in-store or club sales and that delivery is also outpacing pickup. The e-commerce progress, McMillion said, is fueling the growth of the company’s newer businesses, like advertising (up 26% in Q2) and Walmart+ memberships. McMillon said Walmart+ memberships were up double digits and Sam’s Club U.S. saw a record high member count in the quarter. Marketplace sales grew 32% in Q2, the fourth straight quarter of 30% growth.
While e-commerce is still not profitable, global e-commerce losses narrowed, thanks to an almost 40% reduction in U.S. net delivery cost per order. As for long-term profitability in the channel, McMillon told analysts “not to get too hung up on it.”
“We have a great and huge store and club business around the world that is profitable,” McMillon said. “We make money in food. We make money in consumables. We make money in general merchandise. And we'll eventually make money in e-commerce.”
The company is also leaning further in on automation, including artificial intelligence, to improve the experience for customers and its associates. One example, McMillion said, is the company’s recent use of generative AI to improve its product catalog.
“The quality of the data in our catalog affects nearly everything we do, from helping customers find and buy what they're looking for, to how we store inventory in the network, to delivering orders,” McMillion said. “We've used multiple large language models to accurately create or improve over 850 million pieces of data in the catalog.” Without the use of generative AI, McMillion said that work would have required 100 times the headcount to complete in the same amount of time.
However, the inflation tailwinds that helped the company draw in higher-income shoppers in recent years are starting to subside, Neil Saunders, managing director of GlobalData, said in emailed comments. “This makes Walmart’s job of engineering sales growth somewhat more challenging, and it means Walmart will have to push different growth levers if it wants to continue to make a convincing advance,” Saunders said.
Also Thursday, the company announced Bob Moritz would join the board of directors, effective immediately. Moritz retired in June as chairperson of PricewaterhouseCoopers. He was with the global accounting firm for nearly 40 years. Moritz will become the 12th member of Walmart's board.
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Nate Delesline III, Khareem Sudlow
