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Grocery, E-Commerce Pace Walmart Q1 Comp Gains

U.S. comps improved by 3.4% led by fresh food and private label
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Photograph courtesy of Walmart

An omnichannel offering led by grocery e-commerce is continuing to generate momentum for Walmart.

U.S. sales in the fiscal first quarter improved by 3.3% to $80.3 billion and nonfuel comparable-store sales growth of 3.4% marked Walmart’s strongest first-quarter comps in nine years. The comp gain was supported by a 2.3% increase in average ticket and a 1.1% in transactions—a figure Walmart is now reporting to include both store visits and e-commerce trips. U.S. e-commerce sales grew by 37%.

Total revenues of $124 billion increased by 1% overall and were hurt by currency headwinds affecting overseas sales. Adjusted earnings per share of $1.13 were slightly ahead of Wall Street estimates. Thee three-month reporting period ended April 30.

CEO Doug McMillon in prepared comments called out strength in U.S. grocery, including progress in fresh and private label for pacing same-store sales growth. Walmart’s quarterly U.S. grocery comps grew in the mid-single digits, despite disruption in the timing of SNAP benefits related to the government shutdown, while also reflecting strong Easter holiday sales.

“We’ve made good strides in fresh and continue to make progress with the quality of our private brand offering, especially in food where penetration increased 156 basis points during the quarter,” McMillon said.

Net of price investments, food inflation remained negligible in the quarter, Chief Financial Officer Brett Biggs said, although he said inflation was “modest” among consumables.

“The U.S. business continues to benefit from a healthy economic environment, but we’re also pleased with customers’ response to our integrated omnichannel offering,” Biggs added.

Walmart has been scaling its online grocery across the U.S., with pickup now available at more than 2,400 stores and 1,000 offering delivery. Those figures are on track to expand to 3,100 and 1,600 by year-end, Biggs said.

Progress on delivery, displays and pricing online contributed to a 5% improvement since the beginning of the year in its customer value index, a measure Walmart uses to gauge effectiveness of its e-commerce operations, Biggs added.

Walmart U.S.' gross margin rate was better than expected, increasing six basis points year over year primarily due to better merchandise mix, including strength in private brands, less pressure from transportation costs and improved margins in e-commerce, partially offset by continued price investments.

In the U.S., operating income grew 5.5%, as the gross margin rate was better than expected due to a stronger merchandise mix in both the stores and e-commerce, as well as less pressure from transportation costs, partially offset by continued price investments.

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