Walmart Delivered A Winning $161 Billion Quarter, And Out-Played Target

Walmart Chief Financial Officer John David Rainey today offered what might be the best explanation for the giant retailer’s surprisingly strong second quarter.

“This is not your grandfather’s Walmart
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,” Rainey said, in an interview with Yahoo Finance, minutes after Walmart reported it had boosted revenues by 5.7%, grown e-commerce sales by 24%, improved U.S. comp sales by 6.4% and that it was raising its earnings guidance for the year.

Sales of $161.6 billion were up $8.7 billion over the same period last year.

Walmart’s numbers seem even more impressive coming a day after top rival Target
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reported that it’s comp sales fell by 5.4%, e-commerce sales declined by 10.5% and total revenue was down 4.9% during the quarter.

The new Walmart, CEO Doug McMillon said in a conference call with investors this morning, is a “people-led, tech powered, omnichannel retailer.” The message McMillion and other Walmart execs emphasized on the call, was that Walmart’s embrace of new technology is helping it save money and improve operating margins, make shopping more convenient for consumers, and grab market share from the competition.

But tech can’t take all the credit for the winning quarter. Walmart’s success was the result of nimbly combining old-school strategies the company has relied on for six decades, with new ways of doing business.

Here are advantages that led to Walmart’s second quarter win:

It protected its brand identity as low-price leader despite inflation pressures.

That helped it keep its customer base, and attract new customers as shoppers increasingly were feeling squeezed by higher prices. Walmart executives commented during the call that their share of higher demographic consumers is growing, as even households of $100,000 and more are looking for bargains on food and other staples.

Having those higher income shoppers in its stores also gives Walmart the opportunity to sell bigger-ticket and discretionary goods to a valuable demographic.

It dominates in grocery

As consumers were cutting back on non-essentials and looking for ways to save on groceries, Walmart cashed in on its larger grocery presence.

Its investments in e-commerce fulfillment and automation are paying off

Walmart execs noted that much of the 24% growth in e-commerce was driven by curbside pickup and store-fulfilled delivery. Fulfilling e-commerce orders from local store inventory is improving Walmart’s digital margins, Rainey said on the earnings call. Walmart is leveraging its stores to fulfill more than 50% of deliveries, Rainey said, and 15% of the stores are served by the company’s new automated distribution centers, which have reduced costs.

It is scaling its new revenue sources

Walmart Marketplace, which allows third-party sellers to sell on Walmart.com, saw double digit sales growth during the quarter in the home. apparel, and hardlines categories, and the number of customers making Marketplace purchases grew by 14%.

In advertising revenue, global advertising was up 35%, and in the United States Walmart Connect was up 35%, with that business nearly doubling over the past two years.