Global retailer Walmart’s Q1 financial performance was characterized by company senior executives as a strong start, while extending the company’s in-store and online ongoing sales growth momentum.
Highlights for the company’s fiscal Q1 that ended in April included total revenue performance of $123.9 billion, up $1.2 billion year-over year. Sales among U.S. stores and websites operating at least 12 months grew a healthy 3.4 percent during the quarter, representing the best first quarter comp performance in nine years. Revenues were boosted by a strong Easter holiday buying season, and healthy online sales. Online sales reportedly grew by 37 percent in the quarter to include online grocery as well as home and fashion revenue increases.
International sales performance however, suffered from strong currency headwinds. International based revenues at constant currency were reported as $28.8 billion, a decline of 4.9 percent. Excluding currency swings, net sales were up 1.2 percent at $30.6 billion.
As a contrast, rival retailer Target reported its 8th consecutive quarter of comparable revenue increase in the first quarter. Overall comp sales growth was 4.8 percent, consisting of 2.7 percent growth in physical store and 42 percent in online comp revenue growth. Target reported that online same-day delivery, primarily supported by physical stores, drove over half of online sales growth during the quarter.
Operating income declined 4.1 percent to a value of $5 billion. While strong results came from the retailer’s Sam’s Club and U.S. operations, the inclusion of added expenses related to the investment in online retailer Flipkart, dragged on income.
One area of note is that Walmart’s inventory levels have increased nearly $1.5 billion year-over-year, and $482 million in the first quarter. Part of this increase was attributed to stocking added inventories ahead of planned end of 2018 tariff increases on Chinese imports. The retailer also accelerated inventory purchases of toys and shoes to respond to competitive opportunities resulting from the bankruptcies of major retailers in these segments and is reportedly bulking-up inventory among online customer fulfillment centers to prepare for quicker online customer delivery needs.
Unclear at this point are the revenue, inventory and operating income impacts of new added tariffs being posed on Chinese imports as a result of the latest breakdown in trade talks. Walmart executives indicated that the retailer will likely raise some prices in the face of 25 percent tariff levels, but will do so, product by product.
Other Highlights- Next Day Shipping
Prior to the financial performance release, Walmart announced that it will invest $800 million in order to offer online next-day delivery to more U.S. homes by the end of 2019. Walmart.com will begin to offer free next-day delivery on upwards of 200,000 products for U.S. shoppers in Phoenix, Las Vegas and Southern California, with additional areas added later this year. Next day delivery requires a minimum $35 purchase and must be able to be shipped in one box.
Marc Lore, head of E-commerce indicated to reporters that online shoppers will only be able to view one-day ship items that are available in customer fulfillment centers within one-day ground distance to the ship to address, That model enables the online retailer to lower costs per delivery, to offset any added expenses related to one-day shipping.
The move is an obvious response to Amazon’s announced one-day shipping program for Amazon Prime members.
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