BENTONVILLE, ARK. — Walmart’s US e-commerce business surged by 74% in the latest quarter as shoppers stayed home to slow the spread of the coronavirus (COVID-19) pandemic. The number of new customers using online grocery pickup and delivery has increased fourfold since mid-March, said C. Douglas McMillon, president and chief executive officer of Walmart Inc.
Strong top-line results were driven by unprecedented demand as consumers loaded pantries and hoarded toilet paper to prepare for shelter-in-place measures. Panic buying of paper goods, surface cleaners and grocery staples was followed by increased sales of puzzles, video games, home office and exercise equipment. When stimulus checks rolled in, discretionary categories such as apparel, sporting goods and television sets popped near the end of the quarter, McMillon said.
“Our supply chain is amongst the most capable in the world, but in this environment, we’ve stretched it,” he said during a May 19 earnings call. “Not only have products in categories like hand sanitizer, disinfecting wipes and sprays, toilet paper, beef and pork been hard to find, but items such as laptops, office chairs and fabric have been cleared out in some of our stores and online. We’re working to recover our in-stock position as we begin the second quarter.”
Operating income in the quarter was negatively affected by lower gross margin and higher expenses related to enhanced wages and benefits for store associates as well as new safety and sanitation protocols.
Consolidated net income attributable to Walmart in the first quarter ended April 30 was $3.99 billion, equal to $1.41 per share on the common stock, up 3.9% from net income of $3.84 billion, equal to $1.34 per share, in the year-ago period.
Revenues totaled $134.62 billion, up 8.6% from $123.93 billion, reflecting broad-based strength across the business.
“Each segment delivered strong sales growth despite operating limitations in some markets,” said M. Brett Biggs, chief financial officer. “Walmart US comp sales increased 10%; International net sales grew almost 8% in constant currency; and Sam’s Club grew comp sales over 16%, excluding fuel and tobacco.
“Consolidated gross profit margin declined 66 basis points due primarily to the carryover of last year’s price investments, the shift in sales mix to lower-margin categories, the shift in channel mix toward e-commerce and some general merchandise markdowns.”
To offset increased operational costs, the retailer is reducing expenses in other areas, such as management consulting services and travel. Walmart announced it is discontinuing Jet.com, the platform it acquired for $3.3 billion four years ago as part of developing an omnichannel strategy. Marc Lore, founder of Jet.com, joined Walmart following the transaction to lead global e-commerce efforts.
“The Jet acquisition was critical to jump-starting the progress we’ve made the last few years,” McMillon said. “Not only have we picked up traction with pickup and delivery, but our Walmart.com nonfood e-commerce growth accelerated after the arrival of Marc and the Jet team. He leaned into the Walmart brand quickly. We don’t anticipate a significant accounting charge due to this decision, and the vast majority of associates have previously been assigned to the Walmart brand.”
Walmart has withdrawn its full-year financial guidance.
Shares of Walmart trading on the New York Stock Exchange on May 19 closed at $124.88, down 2.2% from the day before.