Walmart Holds On to Pandemic Gains

Walmart is holding on to its gains made during the COVID-19 pandemic, when it cemented its role as an “essential” retailer offering household and food items as well as online and curbside delivery services.

The retailer said Tuesday that total revenues during the first quarter were $138.3 billion, a 2.7 percent increase from last year. In the quarter ended April 30, U.S. e-commerce revenues continued to rise, registering a 37 percent increase.

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Comparable store sales increased 6 percent, and consolidated income was roughly $2.8 billion, a 32 percent decrease from the same period last year when Walmart was one of the few major retailers allowed to stay open during the pandemic’s early days when shoppers were panic buying and stocking up for lockdowns. Adjusted earnings per share for the quarter were $1.69.

In a statement Tuesday, the company characterized its performance as a function of factors including stimulus payments that went out earlier this year as part of President Joe Biden’s American Rescue Plan Act, and some gains in its grocery department. The quarter showed strong demand for grocery as well as general merchandise including homewares and apparel goods, the company said.

“In the U.S., customers clearly want to get out and shop,” Walmart president and chief executive officer Doug McMillon said in a statement. “We have a strong position as our store environment improves and e-commerce continues to grow.”

“We anticipate continued pent-up demand throughout 2021,” he added.

In light of its performance this year, which Walmart executives said they believed showed strong consumer appetite across its offerings, the retailer also updated its fiscal year 2022 guidance to project high single-digit increases in its earnings per share and its U.S. operating income.

Still, they conceded the pandemic was in varying stages of resurgence around the world, including in India, Canada and South Africa, and noted that the retailer faces ongoing supply chain concerns.

“We continue to monitor industry challenges related to transit and port delays, and our merchants have taken steps to mitigate the challenges, including adding extra lead time to orders,” Walmart chief financial officer Brett Biggs said on a call with analysts Tuesday morning.

“The fundamentals of the U.S. business continue to improve, and we’re confident we have the strategy, structure and people in place to serve customers and reach our goals this year and beyond,” he said.

With some questions surrounding the performance of the retailer’s Walmart+ program, which it rolled out last year to harness its soaring e-commerce demand, CEO McMillon punted on specifics, saying the service had more of a “long-term” importance to the business.

The $98-a-year subscription delivery service hinges on demand for grocery and pickup and delivery services, he said, adding that he viewed it as part of a broader strategy to cultivate a “digital relationship” with customers.

“With stores improving in traffic, and e-commerce growing, and marketplace, and all that kind of stuff, we don’t think that Walmart+ should be the primary focus at the moment for us, with all these other opportunities,” he told analysts. “So we’ll keep growing it. At some point, I’m sure we’ll share some more information with you guys about it. I know there’s a request for that because of streaming services and how much people are talking about subscriptions and memberships these days.”

The retailer also touted the strength of other endeavors it has ramped up in recent years, including its recently rebranded Walmart Connect advertising business, its fulfillment services and its online marketplace business, which the company said was boosted by its overall e-commerce growth. Walmart’s online revenues increased by 79 percent last year.

“[We’re] really optimistic about the results with Walmart Connect with triple-digit growth,” said John Furner, Walmart U.S. president and CEO. “It helps connect buyers, sellers and suppliers in a way that’s unique to Walmart. And we’re optimistic about what we see there.

“On fulfillment services, it’s great to see the team expanding capacity. We know we have seller demand,” he said. “And then, as we said in the quarter, we had 37 percent growth in e-commerce on top of a big number last year. We’ve basically doubled the business the last couple of years.”

On the employee front, Walmart has joined a number of retailers adopting the controversial new CDC guidance stating that vaccinated people can be unmasked indoors. The company also said it was giving a $75 cash incentive to employees who have or will receive vaccinations.

While the overall rate of full vaccinations still hovers around 37 percent in the U.S., some Walmart workers are raising concerns about ongoing difficulties in dealing with unmasked customers, and the impossibility of gauging whether they may or may not be vaccinated.

The retailer’s move evokes its delay in implementing a mask requirement at its stores earlier in the pandemic, when it did so last July, months into it, said Cynthia Murray, a longtime Walmart worker in Maryland, and a member of the worker group United for Respect.

“A $75 bonus is a fraction of what we need to survive the economic carnage of this pandemic, and a pittance compared to the billions in profits Walmart has made since March 2020,” Murray said in a statement Tuesday.

United for Respect, the group representing retail workers who have advocated for a “Five to Survive” platform calling for at least $5 an hour in hazard pay during the pandemic, has also pushed for big box retailers to offer a $500 incentive to encourage employee vaccinations.

“When the mask guidelines began, Walmart failed to enforce mask-wearing, and took a lax attitude to limiting crowds in stores,” Murray said. “Now, without even asking their associates who have been on the frontlines of the pandemic, Walmart has rushed to remove these policies entirely. Walmart has demonstrated time and time again that profit, not workers’ safety, is their priority.”

Walmart’s first quarter results pleased Wall Street, which pushed its stock up roughly 2 percent to about $142 in mid-morning trading.

“With robust online sales growth of over 37 percent on a substantial base, coupled with increased margins despite a still heavily weighted food and consumables sales mix, Walmart’s Q1 performance continues to place it in the extreme upper strata of global retail,” Moody’s vice president Charlie O’Shea said in a statement.

“All three segments are running on all cylinders, and Walmart’s upward revision to its guidance for Q2 and the balance of 2021 despite continuing global macroeconomic uncertainty is a reflection of its exceptional execution as it can continue to ‘shift on the fly’ as necessary,” he said.

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