A new website has delivered a rebound in e-commerce sales for the world’s largest retailer Walmart, but falling margins have crimped first quarter earnings, with operating income down four per cent on a constant currency basis.
Delivering its figures for the 13-weeks ended 28 April in the US overnight, Walmart said price cuts and higher shipping costs weighed on gross margin, down 23 basis points.
Despite that sales, up 2.7 per cent on a constant currency basis to US$120 billion, and earnings came in above market expectations – helped along by a rebound in e-commerce sales, up 33 per cent.
Comparable sales (excluding fuel) increased by 2.1 per cent, compared to 1.4 per cent in the prior corresponding period.
Walmart launched a new website during the quarter after online sales experienced a slowdown over the holidays, with growth down to 23 per cent compared to 50 per cent in Q317.
Walmart president and chief executive Doug McMillion said it was a solid first quarter with momentum building across the business.
“We’re transforming to better serve customers, we are changing from within to be faster and more digital, while shaping our portfolio of businesses for the future,” he said.
Walmart made a number of large corporate moves in the first quarter, including a US$16 billion deal for a 77 per cent stake of Indian marketplace Flipkart and a circa £10 billion on the merger of its UK supermarket business Asda with Sainsbury’s.
Walmart also revealed on Thursday that it had sold its banking operations in Canada and Chile in line with its focus on retail.
GlobalData managing director Neil Saunders said the first quarter figures were impressive in that, for a company of its size, Walmart has shown an ability to make dramatic changes to its business model in a relatively short time frame.
“Today’s results are proof not only that Walmart is making gains in its day-to-day business, but that it is now a company firmly in the midst of a dramatic transition. As much as the structural changes are disruptive and, in some cases, profit-eroding, we believe they are necessary in order for Walmart to thrive in a new era of retail,” Saunders said.
“Too many legacy retailers fail to make the bold moves needed to maintain their relevance. Walmart is not one of them. It has both the will and financial muscle to ensure it remains a retail leader for many years to come. Indeed, we think it is one of the few companies that can truly take on Amazon in a serious and meaningful way.”