Walmart becomes lifeline as online sales surge 74%
NEW YORK – Walmart became one of the few lifelines to millions of people as the coronavirus spread, leading to surging profit and sales during the fiscal first quarter.
Online sales in the U.S. jumped 74% for the quarter ended April 30, which captured the brunt of the pandemic. Same-store sales rose 10% at U.S. Walmart stores on strong sales of food, health and wellness goods.
At a time when a huge swath of stores that sell non-essential merchandise temporarily shut down, the nation’s largest retailer had the natural advantage of carrying the very items that consumers needed during the pandemic.
But unlike its online rivals like Amazon, Walmart enjoys an extensive network of nearly 5,000 physical stores and a variety of delivery and pickup options that it ramped up to meet demand for essential items from paper towels to canned food. Walmart’s reputation for low prices also helped as the unemployment rate spiraled to the highest level since the Great Depression.
“Having a wide range of fulfillment options, including delivery to home, collection from store – and by using stores for fulfillment – allowed Walmart to ramp up capacity in a way that many other players struggled to do,” said Neil Saunders, managing director at GlobalData Retail. “We also believe that by using stores effectively, Walmart mitigated some of the higher costs associated with the online channel.”
Walmart shoppers did not limit their purchases to just essential items, using their federal stimulus checks to buy clothing, TVs and video games, which helped boost sales in April. Walmart also said it’s seeing gains in new customers from across all income brackets.
But the company had trouble keeping its shelves stocked, and its inventory fell 6.1%. Costs soared to the tune of $900 million – all of it related to the pandemic. Cash bonuses were issued to all hourly workers, and Walmart upped pay by $2 per hour at its warehouses. It rolled out an emergency leave policy and spent money on shields at checkout lines. Still, it reported a higher operating profit.
Walmart pulled its guidance for the year, citing the chaos of the pandemic. It also pulled the plug on Jet.com, an online startup that it bought for more than $3 billion in 2016 as it sought to ramp up online operations to compete with Amazon.
Walmart says it has more than 3,000 locations for grocery pickup and 1,600 locations that offer grocery delivery. Last fall, it launched “Delivery Unlimited,” a fee-based program that offers unlimited grocery delivery.
This month, the company launched Express Delivery, which gets orders to a customer’s home in less than two hours. The program has been tested in 100 stores since mid-April and will be expanded to nearly 2,000 stores in the following weeks.
Walmart had profit of $1.40 per share. Earnings, adjusted for non-recurring gains, were $1.18 per share. That exceeds the per-share earnings of $1.10 that Wall Street was looking for, according to a survey by Zacks Investment Research.