By Melissa Fares and Aishwarya Venugopal
(Reuters) – Walmart Inc <WMT.N> posted its biggest-ever growth in online sales on Tuesday as shoppers cashed in stimulus checks and ordered everything from electronics and toys to groceries from the safety of their homes amid the COVID-19 pandemic.
The near-doubling of online sales in the second quarter helped the retailer trounce Wall Street expectations for quarterly profit and same-store sales.
The results showed that the unprecedented spike in demand seen by big-box retailers at the peak of the coronavirus lockdowns has remained strong even as restrictions ease, with shoppers using their stimulus checks to shop for discretionary items like sneakers and clothes. This also helped Walmart reduce the number of markdowns or discounts.
However, as stimulus funds tapered off, sales at Walmart returned to normal, recording only a 4% rise in comparable sales in July. Shares of the company were marginally down at $135 in pre-market trading.
“The health crisis has created … both tailwinds and headwinds to our business,” said Chief Financial Officer Brett Biggs on a call with investors. “In Q2, we saw stronger-than-expected sales due in large part to stock-up buying and stimulus spending, but the duration and extent of future government stimulus remains uncertain.”
Walmart executives also said the back-to-school season has been “choppy,” as more school districts rolled back their reopening plans to curb the spread of coronavirus and shoppers had little-to-no need for backpacks and uniforms.
Despite recording $1.5 billion in COVID-19 related expenses, that include higher wages and bonuses for employees, Walmart said its margins improved in the quarter, helped by stimulus checks that had consumers spending on bigger ticket items like home furnishings and apparel.
Gross margins rose to 24.9% in the quarter, edging past expectations of 24.24%.
Walmart’s online and grocery businesses have been bright spots, seeing rapid growth as it expands same-day delivery options and pick-up services.
Walmart’s U.S. ecommerce sales rose 97% in the quarter. Sales at U.S. stores open at least a year rose 9.3%, excluding fuel, in the quarter ended July 31. Analysts had estimated a gain of 5.73%, according to IBES data from Refinitiv.
“If they (Walmart) can sustain a nearly 100% growth in digital sales, they will be taking share away from Amazon and their competitors in the digital arena,” said Hilding Anderson, head of retail strategy at Publicis Sapient.
Walmart Plus, or Walmart+, touted as a rival to Amazon.com’s <AMZN.O> Prime subscription, could upon its launch also be a way to attract new customers and turn them into loyal shoppers, analysts said.
Executives on Tuesday said it was still working towards the launch of the service.
Operating income rose 8.5% to $6.1 billion in the quarter, while adjusted earnings per share of $1.56 also topped the average estimate of $1.25.
Total revenue rose about 5.6% to $137.74 billion.
(Reporting by Aishwarya Venugopal in Bengaluru and Melissa Fares in New York ; Editing by Saumyadeb Chakrabarty, Chizu Nomiyama and Nick Zieminski)
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