Walmart: Demand for household essentials went up as people stockpiled during lockdowns
05/21/2020 / By Franz Walker / Comments
Walmart: Demand for household essentials went up as people stockpiled during lockdowns

“Unprecedented demand” for household essentials in the middle of coronavirus lockdowns has caused sales to spike, according to Walmart. However, the world’s biggest retailer remained cautious as the pandemic also caused a number of issues for it.

On Tuesday, Walmart said that some products were selling in two or three hours what would normally take up to three days to sell. The company said that it had to hire 235,000 extra workers to cope with the surge.

Initially, it was grocery staples that were flying off Walmart’s shelves, said Walmart CEO Doug McMillon. Eventually, people under lockdown started spending more on entertainment, education and exercise, both in stores and online.

McMillon also stated that Americans had been spending their stimulus cheques from Washington on items from televisions to toys. “Discretionary categories really popped towards the end of the quarter,” he explained.

Among the most in-demand products were video games and bicycles. Sewing machine sales also went up as customers started making their own face masks.

Stockpiling helped Walmart

Despite the surge, McMillon said that customers, in general, made fewer trips to stores, reducing transactions by 6 percent in the quarter. However, they tended to spend an average of 16 percent more during each visit.

Overall, the surge in customers boosted like-for-like revenues to ten percent in the three months to the end of April at Walmart’s U.S. stores, and 12 percent at its Sam’s Club membership business.

Walmart says it is more cautious about the weeks ahead. However, its results show how the crisis is widening the gulf between winners and losers in the sector.

Department store chain Kohls reported a decline in first-quarter net sales. Meanwhile, home decor chain Pier One, which had already filed for Chapter 11 bankruptcy, announced on Tuesday that it was closing shop.

Walmart, on the other hand, made $134.6 billion in revenues in the quarter. This is 8.6 percent more than they made during the same time in 2019. Their net income rose from $3.91 billion to $4.07 billion. Meanwhile, their U.S. e-commerce sales in the quarter rose by 74 percent to an undisclosed level.

Not everything is rosy for Walmart

Even as the pandemic has provided a business opportunity for Walmart, it has also stretched the company’s supply chain, stated McMillon.

“Not only have products and categories like hand sanitizer, 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.” (Related: Coronavirus hits grocery workers, truck drivers; supply chain now in danger.)

In addition, Walmart has gotten into the spotlight over its treatment of its staff. Workers’ rights groups have criticized the company over health and safety in its stores, as well as over its health and sickness policy.

On Tuesday, Walmart stated that it had incurred $900 million in costs related to COVID-19. Bonuses for staff alone apparently cost the company $755 million. The company has also pointed to measures it had implemented to improve safety. These include providing face masks and gloves for workers and installing screens at checkout counters.

Overseas business much weaker

Unlike its domestic business, Walmart’s overseas were somewhat more muted, with net sales in its international rising by only 3.4 percent to $29.8 billion.

More importantly, Walmart was forced to close stores in some countries, including South Africa. Its Indian e-commerce business Flipkart, on the other hand, was hit by restrictions on non-essential business. Currency fluctuations also weighed on the company’s results, reducing sales by about $1.3 billion.

Moving forward, Walmart chief financial officer, said that the company expected some “pressure” on operating income largely because of its businesses outside of America, “where we have many of the same challenges as in the US but with greater pressure from government regulations and lesser degrees of stimulus.”

Sources include:

FT.com 1

BusinessWire.com

FT.com 2

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