Walmart raises forecast as sales grow despite Delta concerns

Walmart posted second-quarter results that topped expectations and raised its sales forecast for the year, showing continuing momentum for the retail giant even as it faces tough comparisons from last year’s pandemic-fuelled stockpiling.

Comparable sales gained 5.2% for Walmart stores in the US, excluding fuel, the company said on Tuesday in a statement. That surpassed an expected 3.1% increase, according to the average of estimates compiled by Bloomberg. The company also boosted its full-year outlook for that metric to as much as 6% from a prior expectation of low single digits.

The results show demand is not disappearing after a sales boom in 2020, when Walmart and rival Target benefited from elevated purchases of groceries and household goods during the early days of the pandemic. Despite renewed concerns over consumer sentiment amid the spread of the Delta variant, the world’s largest retailer has momentum heading into the crucial back-to-school and holiday shopping seasons.

“We grew market share in US grocery, added thousands of new sellers to our marketplace, rapidly grew advertising businesses around the world and we’re finding innovative ways to commercialise our data and build technology,” CEO Doug McMillon said in the statement.

Walmart shares were little changed early in New York. The stock rose 4.6% in 2021 through to Monday’s close.

Economic strength

In addition to raising its comparable-sales forecast, the company said it now expects consolidated net sales to be slightly positive for the full year in constant currency, up from a prior expectation of a low-single-digit decline. Walmart also adjusted its operating income and earnings-per-share expectations.

The company attributed the changes to enduring strength in the US economy, and it said it expects “no significant additional government stimulus for the remainder of the year”. Executives in May said the second quarter was starting well in part because of the effect of stimulus cheques for shoppers, which boosted consumers’ spending power.

While the aid has mostly been used by now, many US families have started receiving advance payments tied to child tax credits. The grocery industry could get as much as an $8bn lift from the tax credit payments in the second half of the year, Cowen analyst Oliver Chen estimated in an August 10 note.

The potential boost comes as Walmart, one of the retail industry’s big winners last year, grapples with the challenges of hanging on to new customers amid heightened competition and supply-chain disruptions. While the bulk of Covid-19-related expenses have subsided, Walmart and other retailers now face rising costs for transportation and labour, and they need to decide how much of vendor price hikes can be passed along to shoppers.

E-commerce slows

Walmart’s US e-commerce sales, another closely watched metric, rose just 6% in the quarter ended July 31. Online sales got a substantial boost during pandemic lockdowns, but demand has been expected to slow as shoppers venture back into stores.

In a sign of how much online demand has decelerated, e-commerce contributed only 0.2% to Walmart’s US comparable sales gain in the quarter, compared with a 6% contribution a year ago. 

To further boost its online business, the retailer debuted Walmart+, an online subscription to compete with a similar offering from Amazon, about a year ago. But the retailer has said little about its performance, even downplaying its importance.

Bloomberg News. More stories like this are available on bloomberg.com