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E-commerce and pickup and delivery services paid off big for Walmart Inc. of Bentonville in the first quarter, driving financial results that beat analysts expectations and showed the retailer well-positioned to cater to customers amid the COVID-19 pandemic.
The publicly traded retail giant on Tuesday reported fiscal first-quarter earnings of $3.99 billion, $1.40 per share. Earnings, adjusted for non-recurring gains, were $1.18 per share, and that beat Wall Street expectations of $1.10 per share.
Total revenue rose nearly 9% to $134.62 billion, which also beat Wall Street forecasts. Six analysts surveyed by Zacks Investment Research expected $133.96 billion.
“Our omnichannel strategy, enabling customers to shop in seamless, flexible ways, is built for serving the needs of customers during this crisis and in the future,” President and CEO Doug McMillon said in a news release.
That was evident in e-commerce sales, which were up 74%, driven by “strong results for grocery pickup and delivery services, walmart.com and marketplace,” according to the company. Walmart does not disclose a dollar amount for online sales. In last year’s first quarter, e-commerce sales rose 37%
“Before this crisis we were already seeing robust adoption of online pickup and delivery,” McMillon said during a conference call with analysts. “And this crisis created a need for social distancing and required people to stay at home — customers embraced pickup and delivery even more. Pickup and delivery are attracting greater numbers of new customers. The number of new customers trying pickup and delivery has increased 4x since mid-March.”
He expects the growth in online sales to continue. Walmart said it is temporarily fulfilling orders placed on Walmart.com through about 2,500 of its stores. It also recently started an express delivery option that customers can choose to have their orders delivered to their door in less than two hours.
The two-hour service is in 1,000 stores, “and our goal is to be in around 2,000 stores by the end of June,” McMillon said.
McMillon also said it’s time to stop referring to Walmart’s Supercenter pickup and delivery service as “‘online grocery’ because it’s becoming much more than grocery,” as customers increasingly add other merchandise to their orders.
U.S. same-store sales — a key retail metric that tracks revenue from stores open at least year — rose 10%, led by “strength in food, consumables,” health and wellness and some general merchandise categories, the retailer said.
Walmart spokesman Randy Hargrove said that figure is the highest since Walmart reported a 10.6% rise in the second quarter of fiscal year 2006. Same-stores sales were up 3.4% in the same quarter last year.
Same-store sales at Walmart’s warehouse unit, Sam’s Club, increased 12%, led by in-store sales. But Sam’s Club e-commerce sales rose 40%.
The company said it took on extra costs related to COVID-19 of about $900 million, including bonuses to employees, which reached $755 million. The retailer also increased pay by $2 per hour at its warehouses, created an emergency leave policy, spent money on shields at checkout lines and took other virus-related actions.
McMillon said the company developed a set of priorities to guide its decisions since the crisis began.
McMillon said the first is to support its workers who “are serving on the front line to serve our customers that need access to food and critical supplies.” Since the middle of March, Walmart has hired 235,000 workers in the United States, the majority of which are on a temporary basis, he said.
It also wants to serve its customers. In March, “we experienced unprecedented demand in categories like paper goods, surface cleaners and grocery staples,” McMillon said. “For many of these items we were selling in two or three hours what we normally sell in two or three days.”
Its third priority is to help others. Walmart and the Walmart Foundation have given more than $35 million to COVID-19 relief efforts. It’s also collaborating with federal and state governments.
“In March, we were asked to stand up testing sites for COVID-19 and some of our parking lots,” he said. “As of today, we’ve opened 139 sites, and we expect to open an additional 44 more by the end of May.”
McMillion said he was proud how Walmart has responded to the pandemic.
“During this extraordinary period we’ve continued our ‘Everyday Low Prices,’ continue to build trust and customers, some of whom are trying our products and services for the first time,” he said.
McMillion said Walmart will discontinue Jet.com, the online company it bought for $3.3 billion in 2016.
“While the brand name may still be used in the future, our resources, people and financials have been dominated by the Walmart brand because it has so much traction,” McMillon said. “We’re seeing the Walmart brand resonate regardless of income geography or age.”
Still, Walmart’s purchase of Jet “was critical to jumpstarting the progress we’ve made in the last few years,” he said.
The deal, announced in 2016, was controversial at the time. Walmart had endured eight straight quarters of declining growth in e-commerce sales. Analysts questioned whether the retailer could compete with Amazon, an e-commerce native whose growth threatened Walmart’s dominance.
“It looks very irrational and desperate,” Howard Davidowitz, chairman of Davidowitz & Associates Inc. of New York, told Arkansas Business after the deal was announced. “Right now, I would say the odds are dramatically against them.”
Others were more optimistic. Jennifer Sherman, senior vice president of product and strategy for Kibo of Dallas, said, “There are tremendous synergies there if Wal-Mart can successfully integrate the two customer bases.”
Like many companies, Walmart is withdrawing guidance for the fiscal year. Still, “Our business fundamentals are strong, and our financial position is excellent,” CFO Brett Biggs said.
Walmart shares (NYSE: WMT) have increased roughly 8% since the beginning of the year, while the Standard & Poor’s 500 index has dropped nearly 9%. The stock has risen 26% in the last 12 months.
(The Associated Press contributed to this report.)