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Published
May 19, 2020
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Walmart sales surge at stores and online on coronavirus-led demand

By
Reuters
Published
May 19, 2020

Walmart Inc emerged among the winners of the coronavirus lockdowns, beating Wall Street’s quarterly revenue and profit forecasts and setting an online sales record as millions of consumers stocked up on food and cleaning supplies.



Shares in the world's top brick-and-mortar retailer rose as much as 3.4% on Tuesday and are up about 7% so far this year, outpacing Wall Street's blue chip index, which is down nearly 14% for the year.

Walmart, like many other essential businesses, has seen a surge in demand late in March and early in April, with consumers limiting their trips to the grocers under “shelter-in-place” orders but stockpiling staples.

The retailer said that though demand for toilet paper, surface cleaners and groceries tapered off after initial hoarding, government relief payments helped boost sales in the second half of April.

“Toward the end of the quarter, another phase emerged, call it relief spending,” Chief Executive Officer Doug McMillon told analysts. He said sales have risen for categories for products needed for DIY projects, such as bandanas and sewing machines, while bicycles were also in greater demand.

Walmart executives said the stimulus checks have helped deliver a good start to the second quarter, but they did not expect spending to continue at the same pace.
The company offered little insight beyond that and pulled its forecast for the full year, citing uncertainty caused by the pandemic.

Walmart’s online business grew 74% in the first quarter ended April 30, as its investments in store pick-up and delivery paid off at the time when demand for such services soared. That drove their sales volumes to records, with the number of new customers rising four times since mid-March.

Walmart said uncertainty brought by the coronavirus called for prudence in its investments and cost savings. As part of that the group would discontinue Jet.com, the online start-up it bought in 2016 for $3.3 billion.

The business was undergoing an overhaul last year by integrating its retail, technology, marketing, analytics and product teams with Walmart’s own online business.
Walmart said the strength of its own online operation made it decide to part with business.

Overall, sales at U.S. stores open at least a year rose 10%, excluding fuel, in the quarter. Analysts had expected a gain of 8.8%, according to IBES data from Refinitiv.
Total revenue rose 8.6% to $134.6 billion, also beating analysts’ estimates.

Responding to a surge in demand, the group has been ramping up hiring, adding about 235,000 hourly workers so far to its 1.5-million strong U.S. workforce, temporarily increasing wages and spending more on the maintenance of its stores and fulfillment centers. It said additional costs related to the pandemic reached nearly $900 million.

That pushed operating margins down 62 basis points to 20.5% in the quarter, but operating income still rose 5.6% to $5.22 billion in the quarter. Adjusted earnings per share at $1.18, beating Wall Street expectations of $1.12.

“Walmart is a ‘pandemic winner’ that is likely to pick up share from the distress taking place across retail, particularly small businesses, department stores, and others levered to shopping malls,” CFRA Research analyst Garrett Nelson said.

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