The Supply Chain Matters blog continues to highlight for readers the ongoing implications of the COVID-19 pandemic, the most profound of which has the explosion in online buying among global consumers. Large numbers of populations being locked down in personal residences and ongoing fears for not venturing into public venues such as brick and mortar stores continue to provide the perfect storm of online demand. In this particular commentary, we highlight reported financial and operational performance for retailer Walmart in the latest quarter.

Walmart

Walmart’s Performance

Broad based discount general merchandise and grocery retailer Walmart reported what has been headlined as impressive results for the quarter ending July 31. Business Network CNBC’s headline noted this performance as the retailer’s: “biggest earnings surprise in 31 years as shoppers rushed to spend their stimulus checks, and online sales nearly doubled during the coronavirus pandemic.”

Highlights of financial performance included:

  • Total quarterly revenues increasing 5.6 percent to $137.7 billion, compared to $130.4 billion in the year-earlier quarter.
  • Reported same store U.S. sales increased 9.3 percent in the July ending quarter. In the previous April ended quarter, the retailer had reported a 10 percent increase in comparable U.S. store sales. International sales declined by 6.8 percent, the latter attributed to government-mandated closures related to the pandemic in India, Africa, Latin America, among other regions.
  • Quarterly Net Income was reported as $6.48 billion from $3.61 billion in the year-earlier quarter. That reported number included a large investment gain taken in the quarter.
  • During the most recent quarter, the retailer incurred upwards of $1.5 billion on COVID-19 related costs to included added store and distribution center fulfillment headcount that has now included upwards of 400,000 employees.
  • Looking forward, the retailer continued to decline to specify a financial outlook for the remainder of the fiscal year, citing many uncertain factors including the duration of the pandemic, additional government fiscal stimulus and uncertain consumer confidence.

 

Highlights of operational performance:

Online business reportedly nearly doubled, increasing 97 percent from the year-ago period, boosted mainly by online grocery volumes.

Warehouse focused Sam’s Club memberships reportedly increased 60 percent in the latest quarter, the highest quarterly increase in five years and an indicator that new shoppers were attracted to the site. Revenues increased 39 percent with Sam’s Club comparable sales increasing by 13.3 percent.

In commentary reported to analysts and investors, executives indicated that Walmart brick and mortar customers shopped less frequently, but tended to purchase more when they shopped, which was reflected by a reported 27 percent increase in average cash register ticket.

Executives noted that consumers tended to shift more purchases to online, and the retailer’s curbside pickup services recorded all-time volumes increases.  Overall store-based transaction volumes reported  decreased 14 percent in the latest quarter.

Reportedly, while the global retailer was able to stabilize its previous inventory shortages manifested in the April ending quarter, U.S. inventory levels were noted a 4.6 percent below year-ago levels.

 

Added Perspectives

As referenced in our previous online retail dominance commentary, with the specifics of Walmart’s latest actual quarterly performance now coming to light, the retailer indeed benefited by its prior investments in online fulfillment and now store based curbside pickup-up capabilities while similar retailers struggled.

Looking back a year or two ago, Walmart struggled to boost U.S. same store sales volumes, and subsequently invested billions in developing online shopping capabilities that compete with Amazon. At the same time, the retailer offset the balance sheet burdens of online investment with reducing store-level headcount numbers. That did not go well, and the likely lesson from the COVID-19 pandemic was the retailer’s actions to immediately hire added people to manage higher volumes of online and store level pickup needs. The latest performance reflects the benefits of such actions. Another boost was from the U.S. stimulus plan that flowed money directly into consumer’s pockets.

Beyond that, the competitive contest involving rivals Amazon and Target are indeed evident and ongoing. The risk is more apparent that if there is further virus spread in the upcoming months, and if these specific retailers can maintain inventory availability of products in the most demand, that will likely lead to further market-share gains.

Least we closeout this update without once again providing recognition to the many Walmart associates who risked their own health and safety to ensure that consumers received a steady and convenient flow of essential goods. While the retailer has not disclosed how many associates were sickened or perished as a result of the virus, this overall level of financial and operational performance could not have been accomplished without such sacrifice. Provide credit where credit is due, especially in your next shopping trip.

 

Bob Ferrari

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