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Walmart’s Strong Quarter Bucks the Negative Retail Trend

With the relatively dismal retail performances that have been turned in over the past few weeks by companies such as Nordstrom, Kohl’s and Macy’s, Walmart’s strong performance stands in marked contrast. More critically, its arch competitor Target just announced disappointing results and guarded guidance moving forward.

So, what’s different for Walmart?

Comp stores sales were up 1% in the latest quarter. While not great, it represents the seventh straight quarterly increase, beat consensus expectations up .5% and was significantly better than the pessimistic outlook of their peers. Earnings also beat the consensus estimates. While Walmart is still feeling the earnings impact of increased wages in store, they are also citing improved service scores, suggesting that better people are helping produce better results.

On the negative side, e-commerce sales continued to slow, up only 7% this quarter and continuing a trend of declining e-commerce gains. I weighed in earlier this week on their e-commerce initiatives, which included a much more aggressive free shipping policy and an increased focus on curbside pick-up. As I suggested, these are the right initiatives but perhaps too little to blunt Amazon’s momentum. It is clear from their results that they need to be more aggressive to simply keep up.

It does appear that Walmart is beginning to show tangible benefits from the strategic investments it is making to the business. Better people and better execution is absolutely helping.

All of that said, there is plenty of work to be done. Sales growth of 1% isn’t spectacular, e-commerce is decelerating and net new store growth is slowing down. For now, Walmart is happy enough simply beating the pack. I think this quarter buys them some time but doesn’t answer the lingering longer term concerns.


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