Walmart keeps growing and growing and …

Discussion
Photo: Walmart
Aug 19, 2020
George Anderson

Walmart came out with its second-quarter numbers and the retailer did not disappoint investors. The chain reported that same-store sales, excluding fuel, were up 9.3 percent during the quarter and online sales jumped 97 percent.

Walmart’s strong performance followed a first-quarter for which it reported a 10 percent gain in same-store sales and e-commerce growth of 74 percent.

Speaking on Walmart’s earnings call with analysts yesterday, CEO Doug McMillon said the retailer benefited from tailwinds, including the federal government’s stimulus payments and more people eating at home. The chain also saw sales increase as customers spent money on products to entertain themselves in their homes and also to fix them up.

He also noted that reduced store hours and out-of-stocks in some categories had a dampening effect on sales. Walmart recently announced that it is moving its closing time from 8:30 p.m. to 10:00 in 4,000 of its 4,700 stores. He also said that the chain experienced out-of-stocks in some states where COVID-19 cases were on the rise.

Mr. McMillon said that the retailer has completed the integration of its store and online merchant teams as it continues on its “path to transform into an omnichannel organization.” The company pointed to improvements in online margins as an indication of a more balanced product mix and operational efficiencies it has achieved.

He also touched on reports that the retailer is getting closer to launching Walmart+, a rebranding of its Delivery Unlimited Grocery service.

“We have been testing membership with delivery on limited subscription since late last year. That customer offer was limited to a grocery and consumables delivery service as the reason to sign up,” he said. “Since that launch, we have proven to ourselves that we can pick and deliver a broad set of categories across the supercenter, not just food and consumables, but a wide assortment of general merchandise. We think that assort[ment] breadth and our ability to deliver with speed nationally combined with a few other benefits for customers will result in a compelling proposition.”

John Furner, president and CEO of Walmart U.S., told analysts that its online marketplace performed well during the second quarter. He noted that Walmart Fulfillment Service is up and running and should further add to the ability of third-party sellers to achieve the types of performance that build repeat business.

DISCUSSION QUESTIONS: What is your assessment of Walmart’s progress on its “path to transform into an omnichannel organization?” Where do you see the biggest opportunities — merchant team integration, marketplace sellers, subscription plan, etc. — for Walmart to establish and maintain a competitive edge over its retailing rivals?

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"The retail leader wisely invests in partnerships to fill strategic gaps. "
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22 Comments on "Walmart keeps growing and growing and …"


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Art Suriano
Guest

I think we will continue to see success at Walmart for many years to come. Walmart is a powerful machine that is not afraid to take chances but does it cautiously, and when things don’t work out, they’re not scared to make the necessary adjustments or, when applicable, cancel the program. What works for Walmart is not only their presence which is enormous but their ability to seem to know what the customer wants and how to make the customer happy. Amazon is also a powerful machine, but Walmart seems to have a better reputation with customers because they don’t have a Jeff Bezos in the media almost every day in the limelight. Sam Walton founded Walmart and instilled integrity and smart leadership. Even though he’s long gone, it’s nice to see the company maintaining many of the principles Sam created. Expect great success for Walmart now and in the future.

Gene Detroyer
BrainTrust

We have a tendency to compare Walmart and Amazon. It is correct to do that when we look at retail sales, but we must always be aware that Amazon is a different kind of company. Only 50 percent of Amazon’s revenue is product sales and the balance is trending down as a percent of their total business.

Mark Ryski
BrainTrust

The results speak for themselves — they’re killing it. Walmart has made substantial progress toward transforming into a true omnichannel business. There are so many potential opportunities for Walmart, it’s hard to pick. The real success of Walmart has been in its willingness to test/fail and then rollout. They have a successful formula and my only advice is -– keep going.

Neil Saunders
BrainTrust

Walmart was trading well even before the pandemic came along. However recent trends have enhanced that performance significantly. I doubt this pace of growth will continue if and when things start to normalize. The influx of grocery spending from people dining out less at present has a very big impact on the numbers, and that’s one trend that will probably unravel at some point. However, even if growth does drop back, Walmart still looks like a winner. Its investments in e-commerce are allowing it to grow share and attract new shoppers and that dynamic will continue even as the pandemic subsides. So too will the benefits of investments to ranges and store. These may be less impressive than Target, but they’ve still helped conversion and average transaction size.

Carol Spieckerman
BrainTrust

In terms of opportunity, Walmart is obviously aware of the need to create pathways between grocery and other categories – category connectivity and “mix” were threads throughout the report. In fact, integrating more categories into Walmart’s existing convenience and delivery platform most likely factors into its delayed launch of the Walmart Plus membership program. Walmart seems to need more time to work out a differentiated value proposition here, one that goes beyond fast groceries and creates more distance from Amazon. Walmart’s budding relationship with Instacart and its current Express two-hour delivery beta also factor into the future of Walmart Plus. Once these additional finishes are applied to the Walmart platform, it will be hard to stop the juggernaut. Walmart’s second-quarter performance may well be an anomaly, but the company is better positioned than most to weather any storms going into Q4.

Richard Hernandez
BrainTrust

Walmart has been a stalwart company during the pandemic. They have been very flexible and they have been able to pivot quickly as the business environment changes (curbside, increased online sales, digital marketing, etc.) around them.
I think they will continue to be leaders in the retail sector, and continue to gain/maintain customer loyalty.

Stephen Rector
Guest

Walmart continues to be one of the “winners” this year and while over time the growth will gradually slow, they have made bold moves that will allow them to be one of the most dominant global retailers for years to come.

Brandon Rael
BrainTrust

Walmart was doing quite well before the pandemic. However, Walmart’s significant investments in the digital commerce space are starting to pay dividends, as Walmart has the scale, capabilities, infrastructure, physical stores, and distribution network to meet the increasing consumer demands that have surfaced during the COVID-19 pandemic. From a customer’s perspective, omnichannel is not even on their radar and remains a legacy consulting fulfillment and supply chain buzzword.

Through acquiring digital capabilities, talent, and new customer bases, Walmart is a force to be reckoned with. Their digital-first strategy and leveraging their physical stores as micro-fulfillment centers is a clear competitive advantage. Ultimately, this offers consumers a choice when the default online product search used to take place on Amazon.

Lisa Goller
BrainTrust

The retail leader wisely invests in partnerships to fill strategic gaps. Shopify and Instacart make the Walmart+ subscription more alluring with e-commerce variety and speed. Getting groceries to our doorsteps will help Walmart maintain its edge in an intensely competitive category.

Gene Detroyer
BrainTrust

Doug McMillan assessed the strong start of the year properly. He doesn’t come with puffery, but reality. “… benefited from tailwinds, including the federal government’s stimulus payments and more people eating at home. The chain also saw sales increase as customers spent money on products to entertain themselves in their homes and also to fix them up.”

But Walmart’s real success has been years in the making. The omnichannel strategy was started years ago with the acquisition of Jet and after understanding omnichannel better, integrating it into a total business model.

We can go back decades and see Walmart’s understanding of the maturity of their domestic business and their efforts to go international, now with more stores abroad than in the U.S.

This success goes back to the philosophy of Sam Walton, which was not about being a retailer but about providing products to customers in the most efficient, least costly manner.

Ricardo Belmar
BrainTrust
Ricardo Belmar
Retail Transformation Thought Leader
3 months 4 days ago

Walmart was well on a successful path before the pandemic and the crisis has significantly accelerated this trend. Walmart has become a de facto essential retailer for more consumers than ever who rely on them for value. Value purchases have clearly overtaken luxury purchases for most consumers during these uncertain times and that isn’t showing any signs of changing. Walmart’s grocery business has benefited tremendously during this time as well. I expect Walmart+ will only further increase the acceleration. So long as Walmart can manage out-of-stocks and meet delivery schedules they will continue to gain loyalty from their customers. The announced Instacart relationship will further improve this. As other retailers are trying to recover from the pandemic, Walmart will keep growing through the rest of the year. It will be interesting to see how they perform in the back to school season and then the holiday shopping season. They are well-positioned for 2020 success thanks to their omnichannel improvements – they are truly killing it!

Lee Peterson
BrainTrust

Just goes to show how important it is/was to be deemed “essential.” Very impressive nontheless as Walmart’s devotion to BOPIS over the last three years proved to be prophetic. Congrats.

Brian Numainville
BrainTrust

“Officials confirmed widespread speculation that a subscription-based program, expected to be known as Walmart+, was on the way but they continued to hold back much detail. CEO Doug McMillon said the membership program would follow in the wake of benefits the company realized from previous initiatives to integrate its online food and general merchandise businesses through app consolidation. The program would build on the $98-per-year Delivery Unlimited program launched late last year.”

It will be interesting to see where things go with this subscription service – what else can they bundle into it to create consumer interest?

Richard J. George, Ph.D.
BrainTrust

Walmart has returned to its innovative and growth days which it enjoyed at the turn of the century. I believe the biggest lesson Walmart has learned is that omnichannel is about customers, not channels.

Brad Eckhart
Guest

From what the CEO is quoted as saying, it sounds as though the “path to transform…” has been successful. He states it is completed. This must have been no small task for an organization as large as Walmart. Having served in executive roles during these types of organizational transformations, it is no small feat, even for average size retailers. I give Walmart a lot of credit for recognizing the need to become more omnichannel by consolidating the .com business with brick and mortar. I suspect that even though the CEO states this transformation is complete, there is no doubt fine-tuning yet to be done. I would suspect this integration will be their biggest opportunity in the months ahead.

Craig Sundstrom
Guest

The Energizer Bunny of retailers? and as much as we fetishize over “hot right now” retailers, the GROWTH in sales at Walmart is multiples of the entire revenue at most retailers … even large ones.

That having been said, it’s pretty obvious WM and a few other “essential” businesses, benefitted enormously from simply being open, and it seems unlikely the “recent trajectory” will be maintained (logic suggests they may see stagnation or even a small decline). Sometime in the future, things will be back to “normal” and they’ll be facing the same market saturation problem they were facing before the crisis.

Sterling Hawkins
BrainTrust

The biggest thing to note here is that Walmart has massively changed their culture over the last several years. They’ve started thinking differently, embraced innovation and putting together outside-the-box partnerships. The performance we’re seeing now is just the organic result. They’re on a great trajectory and if they continue to invest in themselves and push the boundary of what’s possible, they’ll be a leader for years to come.

Ananda Chakravarty
BrainTrust

Walmart has been an industry leader, and quite successful with their program, but the competition is just as relentless. Target announced their same store sales at >24% and increase in digital sales of >195% over 2019. According to Target’s earnings call, there was almost 10MM new customers and their omnichannel customers are driving the best solutions.

The market doesn’t stand still for Walmart, and it’s not one single factor that keeps them in the lead. Their best capabilities are the consistent innovation and combined testing and agility of solutions in the market. Walmart has continued the transformation and it is remarkable that a company of its size has been able to accomplish so much change — unheard of in almost any industry. Bigger opportunities will come from their ability to recognize the customer is not bounded by physical or digital limits, but the big benefits will be their worldwide store network and logistics and maintaining presence everywhere — advantages no competitor can match … yet.

Rachelle King
BrainTrust

Among all of the opportunities on Walmart’s path to transform into an omnichannel organization, merchant integration is by far, the most significant. A streamlined internal approach to category management and product assortment, has been needed for some time. It is, undoubtedly, a welcomed transformation for their vendor partners. This will give Walmart a solid, more strategic foundation to accelerate their transformation even faster and more efficiently.

However, they still have a ways to go in their transformation. Today, the vast majority of their revenue is still generated from inside the box, despite the rapid growth in ecommerce. When they get to a place where consumer demand is more balanced across the channels and supply chain and inventory management can meet full consumer demand across all channels without having to prioritize one channel over the other, then they will have truly transformed to the omnichannel leader they are on the path to becoming.

Roy White
BrainTrust

The key elements of this earnings report are the substantial gains in online business and the consolidation of the store and online teams into a single omnichannel operation. In the future, the online business gains won’t be quite as large as the stores come back on stream more fully, but they will be bigger than they were pre-COVID. Walmart’s digital sales are now well established. The management moves tell us that the chain continues to move deeper into a hybrid online/traditional retail mode, a necessary development for the future health of the retail business. Net-net, this earnings report says that Walmart looks very much like it’s going to lead mass market retailing into a new era.

Gary Sankary
BrainTrust

Kudos to Walmart. Early in the pandemic, they championed the health and safely of their team members and the public. They implemented mask policies before they became mandates, they quickly put resources toward touch free fulfillment, they really did an outstanding job. This is no accident, the last several years of investments to build out their eCommerce and Unified Commerce capabilities, like curbside pickup, set up Walmart to serve customers the way they want to be served, on the channel of their choice and with fulfillment options of their choosing.

alinehme
Guest

There is no question that Walmart has invested in omnichannel solutions, and that they are working. Walmart will continue to bring more stores online which will improve their overall eCommerce growth as well as improve integration and grow subscription services. It’s this unified view that brings together operations and supply chain with consumer needs to push Walmart to the forefront of retail.

However, it’s the next quarter that will really test what is working. As McMillion noted, they credit a lot of the current growth to stimulus packages, which are coming to an end. As the US economy stretches its post stimulus legs we’ll see how companies like Walmart can leverage the investments in digital transformation to remain close to consumer needs and adjust to the economic impact. The hard work has been done, now the story will be how they leverage this to win the next round.

wpDiscuz
Braintrust
"The retail leader wisely invests in partnerships to fill strategic gaps. "
"Just goes to show how important it is/was to be deemed “essential.” Very impressive nonetheless...."
"I believe the biggest lesson Walmart has learned is that omnichannel is about customers, not channels."

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