Walmart Accelerates U.S. Sales Momentum

Though reeling in the aftermath of shooting tragedies at two of its U.S. stores, Walmart’s U.S. business is continuing to gain momentum behind increased food sales, in stores and online.

The Bentonville, Ark.-based retailer said U.S. sales in its fiscal second quarter increased by 2.9% to $85.2 billion, while comparable store sales in the U.S. jumped by 2.8%, reflecting a 2.2% increase in transaction size and a 0.6% gain in transactions, which includes store and online shopping visits. Officials said the results point to increased market share in food, consumables, health and wellness, and toys, and is allowing for increased expense leverage, which is benefitting earnings. Walmart's U.S. operating income of $4.7 billion was up by 4% in the quarter.

Companywide, its sales of $130.4 billion and earnings per share of $1.27 were both in excess of estimates. The company subsequently adjusted its full-year financial guidance, saying it now expected same-store sales to come in around the high end of its 2.5% to 3% projection. Its adjusted earnings-per-share figure could also increase when its India investment in Flipkart is included, after previously projecting a low, single-digit decline.

Investors cheered that news with Walmart stock increasing by about 5% in early trading.

E-commerce sales in the U.S. jumped by 37% in the quarter, with a strong push from its online grocery pickup operation, which has continued to fortify Walmart’s momentum and spin off expanded capabilities such as delivery.

CEO Doug McMillon, who has come under some pressure to address Walmart’s stance on weapons sales in the wake of back-to-back shootings at stores in Southaven, Miss., and El Paso, Texas, did so before addressing the retailer’s financial results in a prerecorded conference call.

“As we’ve shared previously, we will strive to use these experiences to identify additional actions we can take to strengthen our processes, improve our technology and create an even safer environment in our stores. We’re also thinking through the broader issues related to gun violence and things we should do to help create safer communities,” McMillon said.

He went on to clarify the company’s current policy on gun sales, emphasizing that the company banned assault-style weapons sales in 2015 and raised its age-limit on ammunition sales to 21 last year. He also said Walmart would sell firearms only after receiving a “green light” on a background check, whereas current federal law only requires the absence of a “red light” after three business days.

“In the national conversation around gun safety, we’re encouraged that broad support is emerging to strengthen background checks and to remove weapons from those who have been determined to pose an imminent danger,” he said. “We do not sell military-style rifles, and we believe the reauthorization of the Assault Weapons Ban should be debated to determine its effectiveness in keeping weapons made for war out of the hands of mass murderers. We must also do more to understand the root causes that lead to this type of violent behavior.”

On U.S. sales results, McMillon said integration of digital and physical assets—which included the recent realignment of Jet—was paying off.

“As we scaled grocery pickup in the U.S., it unlocked new capabilities like grocery delivery. Customers love these services, and we’re rapidly expanding them to new locations and testing new options, such as unlimited grocery delivery for a fee,” he said.

Walmart is also preparing to launch its InHome service, where its own employees will begin making grocery deliveries into homes.

Walmart has also already reached its goal to offer next-day delivery from Walmart.com to about 75% of the country, McMillon said.

Walmart’s Sam’s Club division saw comps improve by 1.2% on a 5% increase in transactions but with average ticket declining by 3.8%.