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Online grocery sales boost Walmart’s Q1 growth

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Sam’s Club also reported strong sales gains

Online grocery sales boost Walmart’s Q1 growth
BENTONVILLE, Ark. — Walmart on Friday reported fiscal first quarter income of $2.1 billion on a 4.4% increase in revenue, to $122.7 billion, thanks largely to a jump in online grocery sales.

Walmart’s digital sales increased 33% in the quarter ended April 27. The company projects online sales will increase 40% for the full year.

“The e-commerce food business we’ve been building is important not only because of the volume it’s driving but, strategically, it’s helping to grow the number of omnichannel customers we serve,” Doug McMillon, the company’s president and chief executive officer, said in a prepared statement. Omnichannel customers spend almost twice as much at Walmart, he said, and they also spend more in stores even after becoming omnichannel customers.

McMillon noted that the company is on track to increase online grocery pickup by roughly 1,000 new locations this year. Also, 800 stores will be used for filling online grocery orders with home delivery.

Marc Lore, CEO of Walmart U.S. eCommerce, said in a conference call that the retailer’s new website redesign makes the grocery shopping options more prominent. Between 10% and 20% of new customers are trying online grocery since the site launched, he said. Online grocery added 1% to Walmart’s U.S. comparable-store sales in the quarter.

Officials also credited new brands in e-commerce, including a partnership with Lord & Taylor, as a factor in the surge in online sales.

Greg Foran, CEO of Walmart U.S., told analysts that Walmart continued to lower its prices in the first quarter, and that these investments, along with higher transportation costs, contributed to a 0.23% decline in the unit’s gross margin. Sales of fresh food and packaged goods helped drive a single-digit increase in U.S. comparable-store sales.

Sam’s Club had one of its best quarters in recent years, with comp sales up 3.8%. Club traffic was up 5.8% in the quarter. Several of the clubs discontinued the sale of tobacco products, producing a 1.4% drag on comps.

“I’m excited by the focus [Sam’s Club CEO] John [Furner] is giving to the fresh food part of our business and the momentum the team is building,” McMillon said. “Members are responding to improved quality and freshness in fresh food, lower prices and more newness. The Sam’s team is also doing a good job driving growth in our private brand, Member’s Mark. Private brand penetration increased more than 2.2% year over year.”

Walmart said eight of its 11 international markets delivered positive comps in the quarter. The combined comp sales for the international division rose 4.5% on a constant currency basis.

Mexico led the way, with same-store sales growth of 9.5%.

Comparable-store sales in Canada increased 2.9%.

In China, comp sales rose 4%, leading to the best performance in more than five years for the unit.

In the United Kingdom, Asda’s comp sales grew 3.4%. Walmart is transitioning out of its majority ownership of Asda after recently selling a 62% stake to rival J. Sainsbury PLC.


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