What's going on?
Walmart always promises low prices, but the same can’t be said of its share price – it rocketed 11% on Thursday after sterling second-quarter results.
What does this mean?
After a chilly start to the year, May and June’s balmy weather inspired customers to buy swimwear and gardening gear to get ready for the summer. Sales in its existing stores (those open for over a year) jumped 4.5% higher than last year’s quarter, way ahead of analysts’ expectations. Also, Walmart’s investment into ecommerce – redesigning its website, offering more delivery options, adding over 1,100 brands – has started to pay off: it helped boost Walmart’s online business by 40% compared to the same time last year.
Why should I care?
For markets: Walmart still has some fight left.
Walmart’s stock had a dismal spell this year – low growth and lots of investment in digitizing its business hit its profit margin and stock price. It’s gone in search of growth by buying Flipkart (the largest ecommerce business in India), selling part of Asda (its low-growth UK grocery store) and – as reported on Thursday – dipping its toes into the video streaming subscription business. Watch out, Amazon and Netflix.
The bigger picture: Retail is dead, long live retail.
Retail has been going well this year in the US overall, but despite some strong results, traditional retailers have been in the doldrums as they try to fight against – and simultaneously adopt – ecommerce. However, those that have embraced ecommerce and invested in technology are starting to get their reward. Alongside Walmart, Macy’s had spiffy results on Wednesday helped by a digital overhaul. Maybe JCPenney will heed this lesson, too, after reporting woeful second-quarter results that sent its shares spiralling down by 25%.