Stimulus Checks Buoy Walmart Sales But Its Ecommerce Sales Are Slowing

The big question is to what degree shoppers are returning to traditional patterns rather than sustaining pandemic era behavior such as online buying and delivery. 

That will determine the future of retail as well as competition with Amazon. JL 

Sarah Nassauer reports in the Wall Street Journal:
 

As some consumers returned to more typical shopping patterns and U.S. government stimulus stoked spending, Walmart sales continued to rise though at a slower pace than earlier in the Covid outbreak. More consumers are shopping in physical stores than at the start of the year and buying products that indicate they are being more social. The retail behemoth gained grocery share versus last year. Sales of nonfood items jumped more than 20% in the quarter, as customers splurged on recreation, home improvement and apparel.

Walmart Inc.’s WMT -0.47% sales continued to rise during the spring quarter though at a slower pace than earlier in the Covid-19 outbreak, as some consumers returned to more typical shopping patterns and U.S. government stimulus stoked spending.

Comparable sales, those from U.S. stores and digital channels operating for at least 12 months, rose 6% in the quarter ended April 30 compared with the same period last year. U.S. e-commerce sales rose 37%. It was the slowest online growth for Walmart since the coronavirus outbreak in early 2020 upended the retail landscape.

Sales of nonfood items jumped more than 20% in the quarter, aided by government stimulus checks as customers splurged on recreation, home improvement and apparel items, the company said. Grocery sales fell compared with the same quarter last year when shoppers hoarded some goods such as food and toilet paper, but the retail behemoth gained grocery share versus last year, Walmart said.

“Our optimism is higher than it was at the beginning of the year. In the U.S., customers clearly want to get out and shop,” CEO Doug McMillon said in a release. “Stimulus in the U.S. had an impact, and the second half has more uncertainty than a typical year. We anticipate continued pent-up demand throughout 2021.”

Stimulus-related spending has continued to boost sales at the start of the current quarter, said Walmart Chief Financial Officer Brett Biggs. More consumers are shopping in physical stores than at the start of the year and buying products that indicate they are being more social, such as travel gear, beauty products and teeth whitener, he said. “You can tell that the masks are coming off,” Mr. Biggs said.

During the same quarter last year, Walmart’s U.S. comparable sales grew 10% and e-commerce jumped 74% as consumers stockpiled.

Overall, Walmart’s global revenue rose 2.7% to $138.3 billion in the April-ended quarter. Net income decreased 32% to $2.7 billion, including losses on its sale of its U.K. and Japanese units and adjustments to the value of its stake in Chinese e-commerce company JD.com Inc.

Shares of Walmart rose about 3% in Tuesday morning trading. The shares were down slightly year to date, compared with a roughly 11% gain in the S&P 500 index in the same period.

Walmart and other retailers face rising product prices, worker shortages and new consumer trends as pandemic shopping habits evolve. April U.S. retail sales were flat compared with March, when retailers benefited after shoppers spent government stimulus checks. Restaurant sales rose in April, while sales shrunk in a range of retail store categories including furniture, sporting goods, clothing and general merchandise, according to U.S. government data.

That could leave a smaller sales pie for retailers that sell goods.

Home Depot Inc. said Tuesday its comparable sales surged 31% in the quarter ended May 2 compared with the same period last year. The company is capitalizing on unprecedented demand for home-improvement projects. Department store chain Macy’s Inc. reported a jump in quarterly sales and swung back to a profit from the year-ago period when many of its stores were temporarily closed. Compared with the same period in 2019, Macy’s comparable sales fell 10.5%.

Macy’s CEO Jeff Gennette said categories that were dormant during the pandemic have begun to show signs of life, including apparel, shoes and handbags. Mr. Gennette said luggage is one of Macy’s most improved categories, signaling consumers are ready to travel.

“We don’t believe this is a short-term pop,” Mr. Gennette said on Tuesday. “This is momentum that can sustain us in 2021 going into 2022.”

Mr. Gennette said that even as the stimulus spending wanes, shoppers are continuing to buy clothes, especially for special occasions like weddings and proms. He noted that sales of black suits for men have tripled since the end of last year.

Meanwhile, Walmart’s principal rival, Amazon.com Inc., continues to grow sales and profits rapidly and hire thousands of workers. The e-commerce giant recently reported record quarterly profit with revenue rising 44% to $108.5 billion. Its results are bolstered by large cloud-computing and advertising businesses.

Walmart is spending heavily to continue to grow online and diversify its business to include healthcare, financial services and advertising, hoping to mimic some of Amazon’s financial model. In February, Walmart said it expects $14 billion in capital expenditures during the current fiscal year, up from about $10 billion last year.

On Tuesday, Walmart raised its forecasts for operating profit for the current fiscal year and said it expects U.S. comparable-sales growth to stay around a previously stated range of a low-single digits percentage.