Walmart Ups Revenue Guidance After Stimulus-Fueled Q1 Growth

Walmart is continuing its focus on serving customers better by “diversifying the model,” said CEO Doug McMillon on the company’s Q1 earnings call Tuesday. Store remodels, investments in pickup and delivery capacity and sales of Walmart+ memberships led growth initiatives. “We need more capacity to get ahead of demand,” he said.

The company continues to “monitor industry challenges related to transit and port delays,” and it’s acting to mitigate them, including "adding extra lead time to orders,” said McMillon. Commenting on stocking levels, Walmart U.S. CEO John Furner said the general merchandise category has been “a bit mixed.” CE is one of the “pockets where we continue to chase demand,” he said. “We’re monitoring things like delays into ports and other factors in the supply chain,” he said.

Revenue grew 2.7% in the quarter ended April 30 to $138.3 billion; it had a $4.2 billion impact from divestitures in Japan and the U.K. Walmart U.S. comparable sales were up 6% year on year to $93.2 billion, with market share gains in grocery, said the company. Walmart U.S. e-commerce sales grew 37%, more than doubling over the past two years. Sam’s Club comp sales rose 7.2% and 47% for e-commerce on strength in curbside pickup, said Chief Financial Officer Brett Biggs. Membership income increased 12.7%, the company said.

Q1 results were better than expected. Biggs cited effects from government stimulus checks in the quarter and “continuing progress in our underlying business.” The retailer was encouraged by improving trends in store transactions, which turned positive in April for the first time in a year, said Biggs. The company’s advertising and fulfillment services businesses are “growing rapidly.”

Walmart raised FY 2022 guidance slightly to a low-to-mid single-digit revenue increase from “low single digits,” not including impact from divestitures, said Biggs. The company doesn’t typically guide to annual revenue until the Q2 earnings release, “but we’re in an unusual period where Q1 stimulus led to meaningful sales and profit tailwinds that weren’t contemplated” at February guidance, Biggs said. “You’re seeing customers get back out again, and it feels like things are opening back up."

FY 2022 guidance is based on assumptions that COVID-19 trends continue to improve and there’s no further government stimulus, Biggs said. Comp sales growth guidance remains the same at low single-digit growth. The pandemic continues to create headwinds and tailwinds for the retailer, said Biggs. Q1 benefited from stimulus spending in the U.S., but COVID-19 continues to negatively affect certain international markets, he said, citing India and Canada. Walmart maintained guidance for the back half of the year.

Looking to second half FY 2022, Walmart is optimistic about high-profile shopping periods including back-to-school, Halloween, Thanksgiving and Christmas “and what families are going to want to do.” The retailer is “buying in a consistent way with how we’re imagining it," said McMillon.

COVID-19 won’t be over “until it’s over for everyone,” said McMillon, citing current challenges in India, Canada, Chile and South Africa. The company is investing resources where it finds opportunities to do so, he said, including providing personal protective equipment, vaccines and financial support. It has administered “millions of doses” in the U.S., he said.

McMillon highlighted a 10-year Walmart initiative to spend $350 billion on items made, grown or assembled in the U.S. It believes the effort will create more than 750,000 U.S. jobs and avoid 100 million metric tons of carbon dioxide emissions. Its American Lighthouse initiative brings together suppliers, members of academia and government “to identify and overcome top-down barriers to U.S. production.”

Walmart is working with Engie North America to create more than 500 megawatts of new renewable energy generation capacity via three wind projects in Texas, South Dakota and Oklahoma, McMillon said. It's able to buy offsite power for hundreds of stores and distribution centers from the wind farms, which it projects will help avoid up to 1.3 million metric tons of greenhouse gas emissions per year.