During the retailer’s second-quarter earnings call last week, executives indicated they would “push back” against proposed price increases from brand suppliers and advocate for manufacturers to invest more in lower prices.
“I hope our brand suppliers are investing in pricing, and we see that from some, we don’t see that from others. We have less upward pressure, but some are still talking about cost increases, and we are aggressively fighting back against that because we believe prices need to come down,” CEO Doug McMillon told investors on Aug. 15.
The retailer’s potentially unpopular but influential position comes at a time when consumers are feeling pressured by higher prices and are responding positively to Walmart’s value proposition.
“We are focused on delivering low prices to our customers and members every day, and we manage U.S. prices to match competitive price differentials. Customers and members are responding to our value proposition. We are seeing continued sales growth, market share gains and higher gross margins. We are demonstrating that we can grow our business sustainably without price inflation,” said John David Rainey, Walmart’s EVP and chief financial officer, during the conference call.
The lower prices enabled Walmart to see “greater participation across all income groups,” led by “upper-income households … while simultaneously increasing our sales and market share among middle- and lower-income households,” he added.
The retailer is also seeing greater customer acceptance of its private label grocery brand, Better Goods, he said.
Walmart reports strong growth in sales and operating profit
That strategy is paying off for the retailer, which delivered solid second-quarter results driven by adapting to consumer preferences for value and quality, as well as overall improved financial performance in e-commerce and at Sam’s Club in a challenging economic environment.
Key highlights of the quarter included consolidated revenue of $169.3 billion, up 4.8 percent from the prior-year quarter, and a 43 basis point increase in total profit, led by Walmart US and Walmart International, underscoring efficiency in managing product costs.
Consolidated operating income rose 8.5% to $600 million, indicating the company is generating more profit after deducting operating expenses. Adjusted operating income rose 7.2%, the company said, due to higher gross margins and an increase in membership revenue while reducing e-commerce losses.
Global e-commerce sales grew 21%, driven by convenient fulfillment options including in-store pickup, delivery and marketplace.
Global advertising also grew 26%, including 30% growth on Walmart Connect in the US, indicating increased interest from advertisers.
Sam’s Club US delivered strong performance in the second quarter with growth in several areas.
Walmart said the big box club delivered strong comparable sales in the second quarter, driven by higher sales in the grocery and health and wellness categories, as well as an increase in transactions and unit volumes, showing that customers are stopping by more often and buying more items per visit. Sam’s Club US also delivered an improved gross profit rate, which increased 22 basis points, highlighting efficiencies in pricing and cost management strategies. However, inventory levels declined slightly by 1.7%, although the company said it maintained inventory levels.
Sam’s Club US e-commerce sales also grew 22%. Membership revenue increased 14.4%, and total members and Plus memberships reached a record high at the end of the quarter. Membership growth shows that customers find value in Sam’s Club’s program.
Walmart’s Q3 Expectations and Fiscal Year 2025 Outlook
For the third quarter, the retailer expects net sales to increase by 3.25 to 4.25 percent and operating profit to increase by 3 to 4.5 percent, adjusted for currency effects.
The company is also raising its expectations for fiscal year 2025. Net sales are expected to grow between 3.75% and 4.75% (compared to previous guidance of 3% to 4%), and adjusted operating profit is expected to grow between 6.5% and 8% (compared to previous guidance of 4% to 6%), also on a constant currency basis.