E-commerce, fresh food boost Walmart Q2 results
TORONTO Walmart Inc. announced robust earnings in the second quarter, racking up its best quarterly U.S. sales growth in a decade and a strong showing in its key international markets of Canada, Mexico and China.
The grocer said it gained 0.6-per -cent market share in Canada in the food, consumables, and health and wellness segments during the period that ended on July 28, citing data from Nielsen research firm.
Walmart said it expanded its omni-channel model, adding online grocery pickups in 21 Canadian stores during the quarter, taking the service to a total of 105 locations across the country.
“Customers continue to respond to our lower prices and this is contributing to market-share gains in key traffic-driving categories such as fresh foods,” said Doug Mcmillon, president and CEO of Walmart in a press release on Thursday. “During the quarter, we completed the rollout of Walmart Pickup for general merchandise to all stores in Canada.”
Net sales in Canada increased 2.8 per cent, with comparable sales growing at 2.6 per cent
Walmart’s U.S. e-commerce growth also ticked higher than previous quarters, driven by a website redesign and continued expansion of online grocery offerings.
In the U.S., Walmart posted its best quarterly sales growth in a decade and upped full-year sales. It reported a 40-per-cent rise in U.S. e-commerce sales during the second quarter, faster than the previous quarter’s 33-per-cent advance.
Sales growth has come at some cost, however, with Walmart citing continued margin pressures driven by cutting prices, higher freight costs due to a shortage of truck drivers and e-commerce investments.
Walmart’s shares were up 10 per cent at US$99.08. The company’s stock had fallen around nine per cent since the start of the year.
The quarter has been a good indicator that Walmart is able to stand strong in the e-commerce market against Amazon.com Inc., especially in the grocery market.
It was “a banner quarter on multiple fronts,” Charlie O’shea, an analyst at Moody’s Investors Service Inc., said in a note. “The food business continues as a bright spot.”
This hasn’t been the case from before when Walmart’s retail ecommerce was struggling to get a leg up against Amazon’s pricing and selection in the past few quarters.
Similar to pressure faced by Canadian grocery chain Metro Inc., Walmart’s expenses were deleveraged mainly because of an increased minimum wage.
At an earnings conference with analysts Wednesday, Metro Inc. executives said they are already facing pressure from suppliers to accept higher prices in light of a recent tariff war.
Walmart’s chief financial officer Brett Biggs said the company was closely monitoring the tariff discussions and are actively working on mitigation strategies, particularly in light of potentially escalating duties.
“It’s important to remember that in all of our markets where we have stores and e-commerce operations, the majority of our merchandise is purchased locally in that country,” Briggs said.
Same-store sales in the States should rise about three per cent in the next fiscal year, which is up from a previous goal of two per cent.
“Customers tell us that they feel better about the current health of the U.S. economy as well as their personal finances,” Biggs said. “With warmer weather, sales of seasonal items like pools, air conditioners, swimwear and gardening supplies really popped in May compared to April. No doubt we were aided by tailwinds during the second quarter.”
Internationally, the company’s total revenue came to US$128 billion, an increase of 3.8 per cent.
The world’s largest retailer also raised its sales and earnings outlook for the full year, excluding any impact from its acquisition of Indian e-commerce company Flipkart, which it is still in the process of closing