Walmart said “unprecedented demand” for household essentials had caused its sales to spike in the pandemic but had stretched its supply chain and the retailer cautioned profits could come under pressure.
The world’s biggest retailer said on Tuesday it had been selling in two or three hours what it would normally sell over two or three days for some products, and had hired 235,000 workers in the US to cope with the surge.
After an initial rush to stockpile grocery staples, consumers under lockdown had spent heavily on entertainment, education and exercise both in stores and online, Doug McMillon, chief executive, said
Mr McMillon said Americans had also been spending stimulus cheques from Washington on items from toys to televisions. “Discretionary categories really popped towards the end of the quarter,” he said.
Video games and bicycles were among the products in demand. Sewing machine sales also picked up as customers took to making their own face masks.
Customers had made fewer trips, reducing the number of transactions by 6 per cent in the quarter, but they had spent 16 per cent more on average on each visit.
The overall effect was to boost like-for-like revenues 10 per cent in the three months to the end of April from a year ago at Walmart US, and 12 per cent at its Sam’s Club membership business.
While the retailer was more cautious about the weeks ahead, Walmart’s results show how the crisis is widening the gulf between winners and losers in the sector.
Home decor chain Pier One, which had already filed for Chapter 11 bankruptcy, said on Tuesday it was to close. Department store chain Kohl’s meanwhile reported a 44 per cent decline in first-quarter net sales.
In stark contrast, Walmart produced revenues of $134.6bn in the three months to the end of April, 8.6 per cent more than a year ago, and net income rose from $3.91bn to $4.07bn. US ecommerce sales in the quarter rose 74 per cent to an undisclosed level.
While the crisis provided a business opportunity for Walmart, Mr McMillon said the retailer had “stretched” its supply chain.
“Not only have products and categories like hand sanitiser, disinfecting wipes and sprays, toilet paper, beef, and pork been hard to find,” he said, “but items such as laptops, office chairs, and fabric have been cleared out in some of our stores and online.”
The retailer has also been in the spotlight over its treatment of staff, with workers’ rights groups criticising Walmart over health and safety in stores and its sickness policies.
Walmart said on Tuesday that it had incurred costs related to Covid-19 of $900m. Bonuses for staff cost $755m, and Walmart also pointed to measures it had introduced to improve safety, including providing face masks and gloves for workers and installing screens at checkouts.
Before the recent hiring surge, Walmart was already the country’s biggest employer, with 1.5m staff in the US and another 700,000 overseas.
The performance was more muted in some overseas markets and net sales at the international division rose 3.4 per cent to $29.8bn.
Walmart was forced to close stores in countries including South Africa, while Flipkart, its Indian ecommerce business, was hit by restrictions on non-essential deliveries. Currency fluctuations also weighed on Walmart’s results, reducing sales by about $1.3bn.
Brett Biggs, chief financial officer, said Walmart expected some “pressure” on operating income in large part because of its businesses outside the US, “where we have many of the same challenges as in the US but with greater pressure from government regulations and lesser degrees of stimulus”.
Walmart joined other large companies in withdrawing financial guidance for the year. Mr Biggs cited “significant uncertainty” in consumer confidence and employment trends, as well as the duration of the pandemic.
Shares in Walmart rose about 1 per cent by midday in New York It has gained 8.5 per cent this year compared with a 12.4 per cent decline in the S&P 500 index.