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Walmart Sees Year Of Pent-Up Demand At Stores; Says Consumers ‘Want To Get Out’

Walmart Sees Year Of Pent-Up Demand At Stores; Says Consumers ‘Want To Get Out’

May 18, 2021 at 03:10PM
by PYMNTS

The world’s largest brick-and-mortar retailer delivered better than expected top and bottom line growth Tuesday (May 18), as Walmart said more customers bought merchandise online and were increasingly inclined to head into its 10,500 stores.

Alongside its latest quarterly results for the three months ended April 30, Walmart also nudged its second-quarter and full-year guidance higher citing its growing confidence with the post-COVID recovery.

“This was a strong quarter. Every segment performed well, and we’re encouraged by traffic and grocery market share trends [and] our optimism is higher than it was at the beginning of the year,” Walmart CEO Doug McMillon said. “In the US, customers clearly want to get out and shop [and] we anticipate continued pent-up demand throughout 2021.”

The Shift To Stores

While the Arkansas-based retailer noted the passing benefit that stimulus payments contributed in March, it said it was encouraged by across-the-board strength in every segment, including unspecified market share gains in the key grocery category as well as its digital sales, which rose 37 percent domestically last quarter and have doubled since 2019.

Walmart said its international eCommerce sales rose nearly 50 percent and that online sales now account for over 12 percent of global revenues, an improvement of nearly 3.5 percentage points versus a year ago, but still reflects the fact that 88 percent of its sales are being done in its stores.

In total, Walmart’s revenue rose 2.7 percent to $138.3 billion, a tally that was actually reduced due to major recent divestitures in the U.K. and Japan yet still easily eclipsed the average analyst expectation by more than $6 billion.

At the same time, Walmart said its U.S. same-store sales increased 6 percent as customers increasingly went inside to do their shopping as COVID-era restrictions were lifted, driving a 43 percent increase in adjusted earnings per share.

“We’ll likely have more uncertainty than a normal year, but we like our position,” McMillion told analysts and investors on the company’s earnings call, noting that stores were getting stronger and eCommerce was expanding. “Customers will decide how and when they want to shop and they’ll find us ready, whether they want to shop in store, pick up an order or have it delivered.”

Increased Q2 And Full-Year Guidance 

To be sure, Walmart is in the throes of a sweeping global transformation of its businesses, while also contending with ongoing headwinds and tailwinds from COVID, as well as constant threats from competitors. Although pandemic and economic uncertainties continue to be a factor, especially in places like India, South Africa and Canada outside the U.S., Walmart broke with its normal full-year forecasting practices of giving guidance at the end of the second quarter.

To that point, Walmart said it expects “low-to-mid single digit” sales growth, while issuing an identical growth outlook for full year U.S. comp store sales growth excluding fuel, and earnings per share, excluding divestitures.

According to CFO Brett Biggs, Walmart’s COVID-related costs fell $400 million last quarter and its omnichannel strategy is resonating with customers.

“Our typical practice is to not update guidance until the second quarter release, but we’re in an unusual period where Q1 stimulus led to meaningful sales and profit tailwinds that weren’t contemplated when we provided guidance in February,” Biggs said on the call, adding that the company’s outlook assumes that COVID conditions continue to improve and there won’t be significant additional government stimulus packages for the remainder of the year.

Keep The Change

With repeated references by Walmart’s leadership team to the so-called “flywheel” it is clear that the company is fully on board with its transformation from the low-price leader to a multi-disciplined integrated machine.

In addition to its omnichannel core retail activities, Walmart is also actively acquiring technology companies, expanding more into health and wellness services, as well as growth in other new ventures such as media, advertising, financial services and wind power.

As the company stated three months ago, the Walmart of today barely resembles the Walmart of five or 10 years ago, and the same will be true five years from now, McMillion said, drawing upon his 30 years of experience with the company that began when he was a teenager unloading trucks.

“Pandemic aside, economic stimulus aside, our focus is on the infant metrics, the underlying fundamentals, the capabilities that we’re adding,” McMillon said, “and we see ourselves making real progress against those [measures]. The company has changed a lot, and there’s more change coming.”