Walmart’s second-quarter growth has slowed a little compared to the first quarter, but the results are still solid and enable the retailer to increase its full-year outlook.
The company’s consolidated revenue was up 4.5 per cent year-on-year to $169.3 billion, with comparable sales increasing 4.2 per cent. Operating income also grew 8.5 per cent.
Although the growth rate was lower than the first quarter, it still has enough fuel in the tank to give the business a very nice lift, according to GlobalData MD Neil Saunders.
“In the context of a food sector in which inflation is moderating and where the gains from shopper switching are weakening, this is a solid performance which is testament to Walmart’s superior execution.
“More broadly, the good results will come as a relief to the wider retail sector as poor trading at Walmart would be a bad omen for the rest of the industry,” Saunders added.
As helpful tailwinds weaken, the analyst believes Walmart’s job of engineering sales growth will be more challenging. He explained that the focus will gradually move from new customer acquisition to retaining recently won-over customers and increasing basket sizes.
While food will remain central to growth strategies, the biggest future opportunity lies on the non-food side, said Saunders. This area has not performed well over the past few years as core customers cut back due to financial pressures. However, things are starting to shift as inflation drops back, and lower-income shoppers should also increase their spending on general merchandise.
Saunders said that in addition to the core business, Walmart is “icing its cake” with its media network and membership program and has huge headroom for expansion in e-commerce. During the quarter, global e-commerce sales grew 21 per cent, led by store-fulfilled pickup and delivery and marketplace, while the global advertising business grew 26 per cent.
For the full year, the retailer expects net sales to increase 3.75-4.75 per cent, compared to the previous guidance range of 3-4 per cent. Operating income is forecast to grow 6.5-8 per cent, up from the prior expectation of 4-6 per cent.
