Walmart Posts 'Solid' Q1 Sales as E-Commerce Rebounds

U.S. sales momentum continued for Walmart in its fiscal first quarter as more shoppers visited stores and spent more money per trip, despite the effects of an unseasonably cool spring in many parts of the country.

The company also reported that its U.S. e-commerce segment rebounded from a relatively weak growth of 23% in last year's fourth quarter to 33% growth in first-quarter 2018.

Nonfuel comparable-store sales of 2.1% in the U.S. and earnings per share of $1.14 were both slightly above consensus estimates, while a 15-basis-point quarterly decline in gross margin percentage—driven by ongoing investments in price and higher transportation costs—was less than analysts expected.

CEO Doug McMillon described the results as “solid” for the quarter, which ended April 27. “Overall, the stores business is getting stronger,” he said of Walmart’s U.S. performance. “We’re using technology in more ways to simplify work for associates so they can better serve customers. This is also helping with inventory flow and expense management. The previously announced starting hourly wage rate increase took effect in February. But because we’re operating more efficiently, we were able to leverage expenses in our stores this quarter.”

E-commerce contributed about 1% to Walmart’s 2.1% U.S. comp figure, led by an expansion of Grocery Pickup facilities, officials said. CFO Brett Biggs said comps were trending higher than 2.1% until cool weather in April slowed traffic and general merchandise sales in the early part of the month. Strength in fresh food and packaged goods drove low-single-digit comp grocery sales for the quarter.

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Gross margin rate declined 23 basis points, primarily due to price investments and higher transportation expenses as a result of higher fuel costs and third-party transportation rate pressures, Biggs said.

McMillon said Walmart was on track to increase online grocery pickup by around 1,000 stores to reach more than 2,100 locations across the U.S. this year, and that it would also roll out grocery delivery to about 800 stores by year-end.

“The e-commerce food business we’ve been building is important not only because of the volume it’s driving but, strategically, it’s helping to grow the number of omnichannel customers we serve,” McMillon said.

Walmart’s Sam’s Club division also showed stronger sales in the quarter, with comp sales growth (excluding fuel and tobacco) of 5.2%, led by traffic growth of 5.6%, and an e-commerce sales increase of about 25%.

Companywide revenue grew 2.7% to $120.7 billion.

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