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08/17/2021

What Walmart's Q2 Means for Grocery

New market share gains and upbeat Q3 outlook equal new competitive pressure
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What Walmart's Q2 Means for Grocery
Customer traffic returned to Walmart stores in the company's second quarter ended July 31.

Walmart said it gained market share in grocery during the second quarter as same store sales at its U.S. stores division advanced 5.2% and customer traffic rebounded from a prior year decline.

Total revenues at the Walmart U.S. division increased 5.3% to $98.2 billion while operating profits increased 20.4% to $6 billion. The gains were driven by an interesting shift in customer traffic and transaction sizes as life for many Americans began returning to familiar patterns during the second quarter ended July 31.

For example, customer traffic, as measured by transaction volume, increased 6.1% in the second quarter while average transaction size was up slightly at 0.8%. Both figures are sharply different than the prior year period when peak pandemic conditions resulted in a 14% decline in transaction volume, but a 27% increase in transaction size as shoppers surged online and bought larger quantities for pick up at stores.

“We had another strong quarter in every part of our business. Our global e-commerce sales are on track to reach $75 billion by the end of the year, further strengthening our position as a leader in omnichannel,” Walmart CEO Doug McMillon said in a statement. “We grew market share in U.S. grocery, added thousands of new sellers to our marketplace, rapidly grew advertising businesses around the world, and we’re finding innovative ways to commercialize our data and build technology. We have a unique ecosystem of products and services designed to serve customers in broader, deeper ways, and we’re grateful to our associates for making it all happen.”

Looking ahead, Walmart said it expects U.S. same store sales to increase between 6% and 7% in the third quarter. If that figure is achieved, it would be a respectable increase on top of the prior year’s third quarter comp increase of 6.4%, which was driven by strength in categories such as general merchandise, health and wellness and food.

Regarding food, Walmart CFO Brett Biggs shared details on the magnitude of the market share gains the company saw in the quarter, based on Nielsen data.

“Grocery sales were up 6%, including the benefit from modest ticket inflation and increased low double digits on a two-year stack basis,” Biggs said. “That results in $2.4 billion of growth in food sales year-over-year and about $5.5 billion of growth on a two-year stack. Strong price positioning, great fresh quality and improved in-stocks are driving results.” 

Walmart U.S. CEO John Furner highlighted several times during a call with analysts that Walmart’s unit volumes are growing faster than dollar share in grocery, a point he made to illustrate the retailer has improved its price position with competitors.

Looking at the Sam’s Club division, sales increased 13.9% to $18.6 billion and operating profit increased 11.5% to $660 million. E-commerce sales grew 27% and membership income increased 12.2% with the number of Sam’s Club members reaching an all-time high. Same store sales, excluding a major impact of increased fuel prices, advanced 7.7%.

As with Walmart, there were some interesting forces in play that affected traffic to clubs and average transaction sizes. For example, transaction volume increased 5.1% and average ticket grew 2.5%, but both figures were below levels seen in the second quarter the prior year when transactions grew 13.3% and ticket grew 8.7%. 

Bentonville, Ark.-based Walmart operates more than 10,500 stores under 48 banners in 24 countries, and e-commerce websites, employing 2.2 million-plus associates worldwide. Walmart U.S. is No. 1 on The PG 100, Progressive Grocer’s 2021 list of the top food and consumables retailers in North America, while Walmart-owned Sam’s Club ranks No. 9 on the list.

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