Walmart beats profit estimates as online sales hit record on pandemic boost

[August 18, 2020]  (Reuters) - Walmart Inc <WMT.N> posted its biggest-ever growth in online sales on Tuesday as shoppers placed orders for everything from electronics and toys to groceries from the safety of their homes amid the COVID-19 pandemic.

The near-doubling of online sales in the second quarter helped the retailer trounce Wall Street expectations for quarterly profit and same-store sales.

The results showed that the unprecedented spike in demand seen by big-box retailers at the peak of the coronavirus lockdowns has remained strong even as restrictions ease, with shoppers using their stimulus checks to shop for discretionary items like sneakers and clothes. This also helped Walmart reduce the number of markdowns or discounts.

However, as stimulus funds tapered off, sales at Walmart returned to normal, recording only a 4% rise in comparable sales in July. Shares of the company were up 2% in pre-market trading.

Walmart has incurred millions of dollars in COVID-19 expenses that include higher wages for warehouse workers and bonuses for store employees, as well as more spending to keep its facilities clean.

Despite higher costs, Walmart said its margins improved in the quarter, helped by stimulus checks that had consumers spending on bigger ticket items like electronics, home furnishings and apparel.

Gross margins rose to 24.9% in the quarter edging past expectations of 24.24%.

For Walmart, its online business has been a bright spot, seeing rapid growth as it expands its same-day delivery options and pick-up services.

Walmart's U.S. ecommerce sales rose 97% in the quarter. Sales at U.S. stores open at least a year rose 9.3%, excluding fuel, in the quarter ended July 31. Analysts had estimated a gain of 5.73%, according to IBES data from Refinitiv.

"If they (Walmart) can sustain a nearly 100% growth in digital sales, they will be taking share away from Amazon and their competitors in the digital arena," said Hilding Anderson, head of retail strategy at Publicis Sapient.

Operating income rose 8.5% to $6.1 billion in the quarter, while adjusted earnings per share of $1.56 also topped the average estimate of $1.25.

Total revenue rose about 5.6% to $137.74 billion.

(Reporting by Aishwarya Venugopal in Bengaluru and Melissa Fares in New York ; Editing by Saumyadeb Chakrabarty and Chizu Nomiyama)

[© 2020 Thomson Reuters. All rights reserved.]

Copyright 2020 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.