Walmart’s profits remains strong
The second quarter numbers show that Walmart remains firmly on the front foot and is holding its own in a challenging and competitive retail market, according to Neil Saunders, managing director of GlobalData Retail.
Saunders said it is particularly pleasing to see sales growth accelerate since Q1 – a ‘clear sign’ that the various initiatives and investments are paying dividends.
The retail analyst points out that some of the growth numbers may seem small. The 3.3% uplift in Walmart’s US sales, for example, looks ‘rather weak’ compared to the 17% increase in Amazon’s retail sales over a similar timeframe.
Walmart US took $2.5 billion more than the same period last year. In this context, Walmart’s performance compares favourably to Amazon, which added $3.5 billion to its retail sales line on a global basis. One of the particular areas of success for Walmart is grocery.
Data from GlobalData Retail shows continued gains in customer share, even in areas where discounters like Aldi have expanded. The reason for this is mostly, although not completely, down to Walmart’s continued investment in everyday low prices. As the grocery sector enters one of its toughest phases, the data firm believes that Walmart is well positioned to make further gains.
“Investments in price, especially on grocery, have eroded gross margins. So too have the various e-commerce activities that Walmart is undertaking,” said Saunders.
“However, it is also pleasing that, for the second consecutive quarter, the US business managed to increase operating income, which rose by 2.2%.
“Focusing more on e-commerce, we remain supportive of Walmart’s efforts to boost its online business through a combination of organic growth and acquisitions.”
The data firm points out that the results of the efforts made in digital are evident from the 67% increase in online gross merchandise value over the period. Acquisitions made a big contribution to this, but schemes like free two-day shipping and discounts for products collected in stores have also increased shopper numbers and encouraged more people to use Walmart.com.
While the home market remains robust, the international picture has also improved. In Mexico, Walmex continues to perform well with a 7% increase in comparables.
“However, Walmart will be most cheered by the turnaround in UK performance, where Asda’s same-store sales rose by 1.8%. While this comes off the back of a 7.5% decline in the prior year, it is nevertheless an early sign that Walmart is addressing some of the issues that have long since plagued the UK operation,” said Saunders.