Walmart Crushes The Quarter With A Blueprint For Retail Success
Elvis Costello’s lyrics “Don’t bury me ‘cause I’m not dead yet” seem to be a fitting way to characterize a busy week of retail earnings on Wall Street. While there were disappointments (watch out, JCPenney), the strong showings of stalwart brick-and-mortar retailers like Home Depot and Walmart suggest that a strong U.S. economy will lift all boats, not just Amazon.
Stunningly, Walmart had its strongest growth in more than a decade for comparable store sales, thanks to strong growth in its grocery and apparel departments, both areas in which Walmart has been increasingly aggressive. Same-store sales in the U.S.: an increase of 4.5% vs. an expected increase of 2.4%, which led to $128 billion in quarterly revenues.
What’s most impressive is that Walmart seems to be firing on all cylinders, driving a rare combination of online and offline growth that is a blueprint for sustained future retail growth.
- Online sales climbed 40 percent during the quarter, with Walmart estimating that it can sustain the 40% rate through the year. After a disappointing last quarter, it seems that the website redesign, increased marketplace growth, and the addition of upscale brands (the Lord & Taylor partnership as an example) is paying dividends.
- Walmart is simultaneously investing in click-and-collect (now available in 1,800 stores) as well as delivery, which will be available to 40% of the U.S. population by year end. With the largest market share in food, Walmart seems to be fending off advances from Amazon, which is far less developed in this area, despite its purchase of Whole Foods. I also wrote about their addition of robotics to click-and-collect facilities, which indicates a laser focus on driving this area to profitability.
- On an even more fundamental front, Walmart is simply executing better. Cleaner stores, fewer “out of stocks,” better customer service and improved assortments can’t be overlooked as a core reason for success. Retail execution remains key.
- Walmart is also reshaping its global map, which I have written about extensively in the past. The purchase of Flipkart, additional investment in China and exiting (more or less) Brazil and the U.K. make it a far different company than it was a year ago.
Of course, few companies have the resources to simultaneously make these investments. But it does suggest a road map for successfully competing in the future.