Walmart has a too much grocery problem
Walmart is coming off another strong quarter. The company posted a 3.2 percent increase in same-store sales, boosted by strong traffic in the chain’s stores, and a 41 percent jump in its online sales, with notable strength in grocery. With these results, the retail giant has achieved five straight years of quarterly growth.
Grocery now accounts for 56 percent of Walmart’s dollar sales in the U.S., and the category’s rate of growth, buoyed by expanded online purchasing options including store pickup and home delivery, was up in the mid-single-digits.
While grocery drives traffic and helps build incremental sales in other categories, it also comes with low margins, particularly when coupled with home delivery, and that has weighed on Walmart’s earnings.
Walmart CEO Doug McMillon said in a statement that he was pushing his team “to do more and move faster,” as Walmart works to create a “more sustainable relationship with the customer, better execute the fundamentals, and improve the overall economics of the business.”
“Our strength is being driven by food, which is good, but we need even more progress on Walmart.com with general merchandise. We’re mixing the business out better to achieve better margin rates, but there is more work to do,” said Mr. McMillon.
“We’re committed to progress and building a larger, healthier eCommerce business,” he added. “Our customers want that, our marketplace sellers want that, and so do we. Grocery pickup and delivery, along with new offerings like Unlimited Delivery and InHome Delivery, will help us unlock advantages we have to serve customers in a way that reduces friction and enhances convenience. We need to translate this repetitive food and consumable volume into a stronger Walmart.com business that’s profitable over time.”
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- In power move, Walmart expands Delivery Unlimited – RetailWire
- CEO says Walmart’s stores are the answer to Amazon – at least for groceries – RetailWire
- Is Walmart at an online crossroads? – RetailWire
DISCUSSION QUESTIONS: What will it take for Walmart to make general merchandise a greater percentage of its overall sales mix? How likely is the retailer to achieve that goal within the next couple of years?