Walmart under-promised and over-delivered in the second quarter

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August 17, 2022

Walmart is apparently capable of surprising itself. The retailer reported better-than-expected sales and profits for its second quarter just weeks after lowering its forecast.

The chain saw a 6.5% increase in same-store sales as food revenues rose in the mid-teens due to inflation. The retailer has gained market share though, as CEO Doug McMillon said of the company earnings callunits were “slightly negative” to “about stable” for the quarter.

“We had our US Store Manager meeting last week and among other topics, we shared examples of items where we are maintaining prices or reducing prices. opening, private labels, food and consumables,” said McMillon.

“We want to help families put meals on the table with great value in our other private labels to relieve the pressure they are feeling. The quality, value and convenience we offer make Walmart a smart choice, and we’re seeing more middle- and upper-income shoppers choose us,” he added.

Walmart chief financial officer John David Rainey said private label growth in food “has doubled from first-quarter levels.”

Rainey said Walmart is also benefiting from stronger inventory positions in grocery stores. “You remember this time last year, we had pockets of stockouts that kept emerging. The only one we really faced in the second trimester was formula, which is getting better now.

Walmart’s bottom line was supported by its advertising business, which grew 30% in the quarter.

McMillon said Walmart’s US network continues to deliver positive results for advertisers.

“Improvements in search and our extensive first-party buyer data have driven improvements in our advertisers’ performance, both year-over-year and sequentially,” he said. “We’ve seen the number of active advertisers investing with us increase by 121% over last year.”

Walmart also said it was continuing to evolve its Go Local delivery service nearly a year after its debut.

“We’ve exceeded 1 million deliveries so far with Go Local. We expect to have approximately 5,000 pickup locations by the end of the year and customer satisfaction scores are strong,” Mr. McMillon “We continue to recruit customers at scale and we are making progress on the biggest unlock, which is small and medium-sized businesses. Our technology and expertise will help many of these businesses grow while contributing to our operating margins over time.

DISCUSSION QUESTIONS: What do you take away from Walmart’s better-than-expected second quarter results as they relate to the national economy and retail? What roles do you think advertising, Go Local and other services will play in Walmart’s competitive and financial performance going forward?

Braintrust

“Walmart’s spike is due to affluent shoppers hunting for deals amid inflationary pressure. No one is above hunting for deals when everything is more expensive.”

“People reward retailers that help them live better by saving them money.”

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