Walmart exceeded Wall Street’s expectations with quarterly revenue and revenue on Tuesday and reported record US online sales after consumers rushed to make ends meet during the coronavirus pandemic.
The world’s top brick-and-mortar retailer shares rose 2 percent in morning trade and about 7 percent so far this year, far exceeding Wall Street’s blue chip index, which is down nearly 14 percent for this year.
Walmart, like many other important businesses, has seen a surge in demand in late March and early April as “shelter” orders that make consumers buy staples while limiting their trips to wholesalers.
The retailer said that despite demand for toilet paper, surface cleaners and foodstuffs tapering after the initial hoarding, sales rebounded in the second half of April as consumers spent money received as part of a government aid package.
“Towards the end of the quarter, another phase emerges – call it aid expenditure,” Chief Executive Doug McMillon told analysts. He said sales had increased in categories such as clothing, TV, video games, sporting goods and toys.
Walmart executives said stimulus checks had helped provide a good start for the second quarter, but they did not expect spending to continue at the same pace.
The company offers little insight beyond that and pulls its forecast for a full year by saying there is too much uncertainty because of the pandemic.
Walmart’s online business rose 74 percent in the first quarter, because its investment in pick-up at the store and shipping paid off just as demand for the service surged.
It said the power of online operations alone made him decide to stop Jet.com, an online start-up that was acquired in 2016 for $ 3.3 billion.
This business underwent a reshuffle last year by integrating its retail, technology, marketing, analytics and product teams with Walmart’s own online business.
Walmart added that pickup and delivery of food items for food and other consumables reached record sales volumes and also saw high demand for electronic goods, toys and sporting goods in the quarter.
Overall, sales at US stores open for at least one year rose 10 percent, excluding fuel, in the quarter ending April 30. Analysts had expected an 8.8 percent increase, according to IBES data from Refinitiv.
Total revenue rose 8.6 percent, to $ 134.6 billion, also beating analyst estimates for $ 132.79 billion.
Responding to the surge in demand, the group has increased hiring, increased temporary wages and spent more on maintaining its shops and fulfillment centers and said additional costs related to the pandemic reached nearly $ 900 million.
That pushed operating margins down 62 basis points, to 20.5 percent, in the quarter, but operating income still rose 5.6 percent, to $ 5.22 billion, during the quarter. Adjusted earnings per share at $ 1.18, beating Wall Street’s expectations of $ 1.12.
“Walmart’s online business is largely able to handle this growth spurt in existing capabilities,” said Moody’s analyst Charlie O ‘Shea, describing the decline in margins as “quite benign.”
