Yahoo Finanzas Walmart Is Done Punching Below Its Weight in Fashion
Updated May 16 at 4:06 p.m. E.T.
Walmart Inc. — which overcame a tough first-quarter consumer market to beat earnings estimates and raise its outlook for the year — is looking to go even bigger in fashion.
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“We punched below our weight on general merchandise, specifically in apparel and home for a really long time, maybe forever,” said Doug McMillon, president and chief executive officer, on a conference call with analysts.
“The progress that we’re seeing now is driven by the in-store remodels and in e-commerce,” McMillon said. “The marketplace is a great opportunity, but [first-party sales handed directly by Walmart] will be important, too. So we’ve now got tools that we can use to grow the general merchandise business that we didn’t have before.”
Walmart doesn’t break out the specifics, but the retailer is generally seen as the second-largest player in apparel, footwear and accessories in the U.S. behind Amazon. Coresight Research recently estimated that Walmart logged $29.5 billion in U.S. fashion sales last year (including third-party sales, but excluding Sam’s Club). By comparison, Amazon’s fashion take tallied $56.4 billion.
But Walmart has something Amazon doesn’t — 4,600 stores, 93 percent of which are used to deliver online orders.
The brick-and-mortar doors are getting a refresh that puts fashion front and center with prime space near the cash registers — 63 were remodeled in the first quarter with a total of 650 doors slated to get a new look this year.
Walmart has also been leaning more into fashion as it builds its web business, which facilitates sales from third-party players on its marketplace.
The company’s global e-commerce business — which topped $100 billion in sales for the first time last year — grew by 21 percent in the quarter.
All together, Walmart carries more than 420 million stock keeping units online with the number of marketplace sellers increasing by 36 percent since the prior year. Much of the action is happening in apparel, a category that made up about half of Walmart’s online skus as of a year ago.
“It’s exciting to see more customers shopping more often, particularly in the marketplace,” said John Furner, CEO and president of Walmart U.S. “The categories that are really strong that are standing out is apparel and fashion online. I’m really excited about what’s happening in men’s and women’s and kids’ apparel, we’ve seen growth there.”
While Walmart has been the bricks-and-mortar leader for generations now, it has grown to be much more channel agnostic under McMillon, who has led the company for a decade, and has steadily turned the giant toward a more modern positioning that embraces the web and new kinds of businesses.
“Whether the sales come through stores, clubs, first party or marketplace, we just want to have what people are looking for,” McMillon said. “And we’ll manage the mix on the other end of it in a way that generates more profitability, which is what you’re seeing in this quarter.”
The company’s first-quarter net income jumped by more than 200 percent to $5.1 billion, or 63 cents a share. Adjusted earnings per share rose a milder 22.4 percent to 60 cents, but were still well ahead of the 52 cents analysts projected, according to Yahoo Finance.
Revenues for the quarter ended April 30 increased 5.9 percent to $161.5 billion from $152.3 billion a year earlier, with a 3.8 percent increase in comparable store sales in the U.S.
Walmart’s advertising business expanded by 24 percent, showing continued growth at what many see as a profit center given Walmart’s massive consumer reach.
Inventory levels fell 2.7 percent compared with a year ago, including a 4.2 percent drop in the U.S., where the retailer is looking to operate efficiently and catering to consumers who have been hit hard by inflation.
Walmart now expects to be “at the high-end or slightly above” its previous top and bottom-line guidance, calling for adjusted earnings of $2.23 to $2.37 a share and sales growth of 3 percent to 4 percent.
“The momentum we see across the business is driven by growth in units sold and transaction counts as well as market share gains, including general merchandise,” McMillon said. “These are not inflation-driven results. In the U.S., like-for-like sales inflation was about 40 basis points for the quarter, including midsingle-digit deflation in general merchandise and low-single-digit inflation in food and consumables.”
Investors liked what they heard and sent shares of Walmart up 7 percent to $64 on Thursday.
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