What's going on?
Walmart’s quarterly profit beat investors’ expectations on Thursday – but neither that nor its improved forecast for the rest of the year stopped them ditching its stock, which fell 2%.
What does this mean?
Walmart’s sales at US stores open at least twelve months were 3.4% higher than the same time last year, better than investors had predicted, and ecommerce grew 43% – faster than last quarter. Just as well, given that Walmart’s spent heavily on growing its online presence; and buying India’s Flipkart should push that growth further still.
The company pointed out back-to-school gear and health and wellness items as particularly strong areas – but groceries still make up about half of Walmart’s sales. Last quarter was also good for groceries – but Walmart has plans to “family size” its future here. Only 2,100 of its more than 5,000 US stores currently let customers pick up online orders – and only 600 deliver groceries to customers’ homes. Quickly increasing these numbers will make shopping at Sam’s more convenient, hopefully increasing sales.
Why should I care?
For markets: The world is not enough.
Despite better-than-expected results from America’s biggest retailer, investors sold its shares on Thursday. When established retailers talk about adjusting to an ecommerce-loving world, it can sometimes remind investors that these companies have a long way to go – and that future success is far from guaranteed, especially when Amazon’s the competition. Investors potentially unwilling to go on backing these retailers’ hard graft might have sold not just Walmart’s shares, but Macy’s as well.
The bigger picture: Global grocery champ or chump?
In April, Asda – Walmart’s UK grocery chain – announced plans to merge with rival Sainsbury’s, Britain’s second-largest grocer. Regulators are still considering the proposal, aiming to ensure that the combined company doesn’t have too much power to unfairly raise customers’ prices – and all the while discount chains are running amok. A more expensive supermarket probably won’t help UK retail recover from its slump…