Walmart Posts Strong Pandemic Revenues
The retailer continued to generate strong revenues during the pandemic, and e-commerce sales grew by 94 percent.
By Sindhu Sundar on August 18, 2020
Walmart has continued to thrive during the COVID-19 pandemic, with increased consumer spending on essentials at its stores and booming online sales.
The company’s revenues for the second quarter of fiscal-year 2021 shot up to $137.7 billion, which it said was a 5.6 percent increase from last year. Its consolidated net income for the three months ending July 31 were $6.48 billion, a nearly 80 percent increase from last year. Its adjusted earnings per share were $1.56.
Walmart’s operating income for the quarter was roughly $6.06 billion, an 8.5 percent increase from last year’s $5.58 billion. Online shopping continued to soar, with Walmart’s e-commerce sales growing by 97 percent, according to the company.
And the retailer’s comparable-store sales in the U.S. increased by 9.3 percent, reflecting robust demand in food and other product categories, the retailer said.
Despite the gains, Walmart’s stock slipped 0.7 percent to $134.71.
“I want to give a big ‘thank you’ to our associates for their tireless efforts during these unprecedented times,” Walmart chief executive officer Doug McMillon said in a statement Tuesday.
“We also appreciate the trust and confidence of our customers,” he said. “We remain focused on serving them well now and expanding our set of global capabilities to serve them well in the future.”
The retailer’s strong results continued to track with its performance in the first quarter. Walmart was one of the few retailers allowed to remain open for essential shopping, while government-mandated shutdowns in March closed the doors of many others, a number of which have filed for bankruptcy since April.
Walmart also said it incurred $1.5 billion in “incremental costs” related to the pandemic, and that it has hired more than 500,000 new associates since the start of 2020. The retailer incurred such costs as it ramped up hiring and awarded what it has called “special” bonuses to its workers. For context, that $1.5 billion sum is roughly 38 percent of the $3.9 billion in net income the retailer made in just the first quarter of fiscal-year 2021 alone.
The first round of bonuses, which the retailer paid in April, amounted to $300 for each full-time hourly associate and $150 for each part-time hourly associate. In March, the company announced a $2-an-hour raise for fulfillment center workers until Memorial Day, which had put the starting pay for fulfillment center workers in the range of $15 to $19 an hour at the time. In July, the retailer said it would pay out yet another round of bonuses to workers, amounting to a total of $428 million.
Meanwhile, a number of workers have raised concerns about the retailer’s pay and worker safety policies, particularly during the pandemic. Walmart’s base hourly wage for workers, which was raised in 2018, has been $11 an hour, and worker advocacy groups have also pointed out that store associates — responsible for carrying out hygiene protocols during the pandemic, and who risked exposure to customers not wearing masks — have not received hazard pay.
Walmart said in mid-July, four months after pandemic-related lockdowns went into place in March, that it would require customers to wear masks. The worker organization United for Respect said in a statement in July that though its members welcomed the policy, it raised questions about how store associates should implement it, potentially risking confrontations with customers defying the mask requirement.
“And while this is an important measure for public health, this new policy will inevitably put retail associates in difficult and even dangerous situations,” United for Respect said last month.
“We need to hear directly from Walmart about how they plan to protect associates if customers refuse to comply with mask-wearing or take them off once in the stores.”
The toll of the pandemic has generally amplified concerns about the lack of hazard pay, and questions about measures to protect low-paid essential workers who must show up for consumer-facing roles, as new cases have spiked in hot spots around the U.S. The U.S. leads the global death toll count in COVID-19 casualties, with more than 170,560 deaths in the country since the pandemic began, according to the case tracker by Johns Hopkins university.
Walmart embarked on a hiring push this year as demand for food and essential supplies shot up during the pandemic, along with demand for items related to home improvement and hobby activities as pandemic-related quarantines continued, and white-collar employees were able to continue working from home.
The high demand translated to challenges maintaining inventory on shelves, particularly during the start of the second quarter, company executives said in a call with analysts Tuesday morning.
“We were obviously feeling pressure in the beef and pork categories,” McMillon said on the call.
“We were having challenges in sporting goods, we needed a lot more inventory than what we had during the second quarter,” he added. “We look a lot better today, but we were really a lot lighter than we would have wanted to have been.”
On Tuesday’s call, company executives also teased a membership service, which McMillion said the company was testing since 2019 in the form of unlimited delivery subscriptions. The retailer’s chief financial officer Brett Biggs also told analysts the company sees the goal of a membership program as cultivating long-term relationships with customers.
“And if you want delivery from Walmart frequently, it’s just more efficient for the customer to buy it in bulk and that takes the form of an annual membership,” Biggs said. “And then we’ll add some things to it beyond just delivery so that it’s really more of a membership and a relationship. Building repeat [customers] is going to be an important aspect for the company to focus on.”
The retailer said it was still not providing guidance for the rest of the year, in light of ongoing uncertainties.
Analysts issued sunny reviews of Walmart’s performance so far.
“Walmart’s Q2 performance, with an almost doubling of online sales, among a litany of expectations-exceeding results, continues to raise the bar for multichannel retail as the company continues to leverage its massive store base to support its e-commerce initiatives,” Moody’s vice president-senior credit officer Charlie O’Shea said in a statement Tuesday.