Walmart's designation as an essential retailer that allowed it to stay open during the pandemic may have resulted in more than just a surge in first-quarter earnings from strong big-box store sales and investments in e-commerce.
With nearly all of its more than 4,600 U.S. stores open and a major expansion in e-commerce sales already underway, the nation’s largest retailer may have painted a picture of the future of shopping.
As it adapted to the fast-pace growth of e-commerce sales, Walmart said it expanded capacity for pickup and delivery services, a tactic many other retailers and shopping center owners are developing. It also established temporary ship-from-store options at some 2,500 locations and sped up its launch of "Express Delivery," a two-hour service.
Sales jumped at stores open longer than a year, a key industry metric known as same-store sales, for the quarter ending April 30. E-commerce sales vaulted 74%, led by robust results for grocery pickup and delivery services, Walmart.com and Marketplace, the retailer’s twist on online retailer Amazon.
Walmart, Sam’s Clubs and its online sales rang up 8.6% higher on a year-over-year basis to $134.6 billion, an increase of $10.7 billion. But the sales came at a considerable cost to operations as Walmart rejiggered its procedures and hired more than 235,000 new hourly workers to help staff stores and distribution facilities.
The Bentonville, Arkansas-based company covered $900 million in extra costs tied to the pandemic that also included raising wages for warehouse workers, paying bonuses to store staff and installing strategies to head off the spread of coronavirus in its facilities.
“The company’s net sales and operating results were significantly affected by the outbreak of COVID-19,” Walmart said in its earnings statement. The retailer does not hold conference calls.
“Unprecedented demand for products across multiple categories led to strong top-line results,” it added. “Certain incremental costs negatively affected operating income, including costs associated with enhanced wages and benefits as well as safety and sanitation.”
Even still, operating income came in at $5.3 billion, a 5.6% increase that included improved e-commerce results. The company said it was discontinuing Jet.com, the online site it acquired a few years ago, and replacing it with Walmart.com, its enhanced website.
March and April proved critical months for sales of food, consumables and health and wellness groceries through in-store, online and "buy online, pick up in store," a relatively new shopping method referred to as BOPIS. April sales were fueled in part by government stimulus checks, Walmart reported.
Though foot traffic into stores slowed, spending per basket rose 16.5%. The jolt in e-commerce sales and delivery services, which rose fourfold, helped offset the fall in apparel and other general merchandise areas, the company said.
Like other retailers selling groceries and healthcare products, allowing them to get the designation of essential businesses from government officials, Walmart’s sales were expected to benefit when many of its competitors were shut. The pandemic forced nonessential retailers such as restaurants, specialty and departments stores to close, putting retail unemployment on overload.
As most of the nation’s largest retailers were forced to temporarily close, Walmart had nearly all of its more than 4,600 U.S. stores open. Its hours changed as the weeks of quarantine wore on while it temporarily closed some departments, redeployed workers and instituted a deep-dive, overnight cleaning practice.
Its hiring spree alone was noteworthy, amounting to nearly 2,600 new workers brought on each day, or roughly two per hour. Walmart has said it hopes to keep many of those hires as the momentum of the pandemic eases.