Walmart's Q2 US Comp Sales Jumped 9.3%; Executives Wary of Virus Uncertainties

Walmart's Q2 revenue grew 5.6% to $137.7 billion, fueled largely by government stimulus payments, said the company Tuesday. Walmart U.S. same-store sales grew 9.3% from the 2019 quarter as consumers dined and entertained more at home and upped their home and yard spending, said CEO Doug McMillon on an investor call. E-commerce sales soared 97%, to two-thirds of comparable sales, said Chief Financial Officer Brett Biggs.

Transactions in the quarter fell 14%, but average ticket jumped 27%, said Biggs: “Customers are coming less often, but they're buying a lot more while they're there.” Comp store inventories dropped 10% in the quarter, reflecting higher than normal sales and out-of-stock items. Walmart refrained, as it did in Q1, from giving guidance for full-year 2020, citing COVID-19 uncertainties. The stock reached a 52-week high of $137.63 early Tuesday, before retreating and closing the day 0.7% lower at $134.71.

Benefits from government stimulus payments “waned toward the end of the quarter,” said McMillon. Other headwinds in Q2 included reduced store hours and “out of stocks.” Q2 shelter-in-place rules meant strong TV, computing and connected home sales, but back-to-school was negatively affected by COVID-19 in “timing and demand,” he said. There was Q2 “volatility” in the supply chain, he said, but some categories are beginning to recover.

Commenting on the “buzz” about a Walmart membership program, McMillon said the company is moving toward a launch, with details to come. It has been trialing membership subscriptions with delivery since last year, limited to grocery and consumables. The trial has “proven to ourselves that we can pick and deliver a broad set of categories” at stores, including a “wide assortment of general merchandise.”

The retailer is "excited about the prospect of customers being able to access products and prices at Walmart any way they choose," said Walmart U.S. CEO John Furner when asked how its test with Instacart meshes with plans to launch a membership delivery program. It's testing a quick-delivery service with Instacart in three markets in California and one in Oklahoma. The test is only about a week old, he said: "So really no read or anything to report on at this point, but we're looking forward to learning about the data as it comes in."

With the earliest store reopenings, daily operating hours ended at 8:30 p.m., contributing to a lag in sales, said Furner. About 4,100 stores have since shifted to 10 p.m. closings, he said. On back-to-school and holiday shopping, Furner said customer sentiment is “a little lower than a year ago” with many consumers thinking about job security. People perceive they’re spending more on food, “despite eating out less.” As a result, Walmart will be “thoughtful about the way we plan the rest of the year and we'll be very adaptive and react to changes and the trends that we see from our shoppers.”

Three-quarters of Walmart's $1.2 billion in COVID-19 costs in the quarter were for bonuses and employee benefits, said Furner. Cleaning and sanitation costs were about a quarter of that, he said. Walmart is working on automation pilots, including one in New Hampshire with a system called Alert that “does our grocery picking” up to the point of dispensing an order, said Furner. That pilot will extend to Texas over the next few months. “We're optimistic about the number of orders we'll be able to fill from these sorts of installations," he said.