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Diving certificate:
- Walmart’s consolidated sales rose 4.8% year-over-year to $169.3 billion in the second quarter, the retailer said in an earnings release Thursday. Total operating income was $7.9 billion, up 8.5%. U.S. net sales rose 4% year-over-year to $115.3 billion.
- Global e-commerce sales rose 21% and 22% in the company’s U.S. business segment. Comparable U.S. sales (excluding fuel) rose 4.2%, which Chief Financial Officer John David Rainey attributed to strong customer traffic and sales growth in stores and online.
- Walmart also issued third-quarter guidance and raised its full-year forecast. The retailer forecasts third-quarter net sales to increase 3.25 percent to 4.25 percent. For the full year, net sales are now expected to increase 3.75 percent to 4.75 percent, up from the previous forecast of 3 percent to 4 percent.
Diving insight:
Despite slowing retail trends elsewhere, Walmart is “not experiencing a weaker consumer,” CEO Doug McMillon said on a conference call with analysts as the company reported second-quarter performance that beat analysts’ expectations. The retailer also continues to compete on price, he said, with more than 7,200 price cuts in the U.S.
TD Cowen analysts led by Oliver Chen said in a note that the general merchandise unit, which makes up about 30% of Walmart’s assortment, was a bright spot, posting flat comparables for the first time after nine quarters of declines. Walmart’s value, digital and delivery convenience, and practical adoption of artificial intelligence “lead to attractive durability,” Chen said.
McMillon said during a conference call that pickup is growing faster than in-store or club sales and that delivery is also outpacing pickup. The advancement in e-commerce, McMillion said, is driving growth in the company’s newer business lines, such as advertising (up 26% in the second quarter) and Walmart+ memberships. McMillon said Walmart+ memberships grew double digits and Sam’s Club US saw a record number of members in the quarter. Marketplace sales rose 32% in the second quarter, the fourth consecutive quarter of 30% growth.
Although e-commerce is still not profitable, global e-commerce losses narrowed by nearly 40% thanks to a reduction in net shipping costs per order in the U.S. As for the channel’s long-term profitability, McMillon advised 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 consumer goods. We make money in general merchandise. And eventually we’ll make money in e-commerce.”
The company is also increasingly relying on automation, including artificial intelligence, to improve the experience for customers and employees. One example, McMillion said, is the recent use of generative AI to improve the product catalog.
“The quality of the data in our catalog impacts nearly everything we do, from helping customers find and buy what they’re looking for, to how we store inventory across the network, to how we deliver orders,” McMillion said. “We’ve used several large language models to accurately create or enhance over 850 million records in the catalog.” Without the use of generative AI, McMillion said that work would have required 100 times as many people in the same amount of time.
However, the inflationary stimulus that has helped the company attract higher-income shoppers in recent years is starting to fade, Neil Saunders, managing director of GlobalData, said in an emailed comment. “That makes Walmart’s task of delivering sales growth a little more challenging and means Walmart will need to pull other growth levers if it wants to continue making compelling progress,” Saunders said.
Also on Thursday, the company announced that Bob Moritz would join the board of directors, effective immediately. Moritz resigned as chairman of PricewaterhouseCoopers in June. He worked for the global accounting firm for nearly 40 years. Moritz will be the 12th member of Walmart’s board of directors.
