By Sarah Nassauer 

Walmart Inc. is reaping the rewards of being one of few retailers positioned to successfully navigate a global pandemic, reporting a surge in quarterly sales as consumers turned to its giant stores to stock up on food and household goods.

The country's largest retailer said U.S. comparable sales, those from stores and digital channels operating for at least 12 months, rose 10% in the quarter ended May 1. It was a period when the new coronavirus upended consumer buying habits, forced many competitors to temporarily close and led more than 30 million Americans to file for unemployment.

Walmart's U.S. foot traffic fell in the quarter, but spending per transaction rose 16.5%. Walmart sales got a boost in April when shoppers spent government stimulus money, the company said. E-commerce sales jumped 74% as millions of customers switched to ordering online for home delivery or picking up groceries in the company's parking lots.

The company said it absorbed about $900 million in additional costs related to Covid-19, including raising wages for warehouse workers and paying bonuses to its store staff. It also hired 235,000 new hourly workers to help it staff stores. However, Walmart still reported a higher operating profit for the period.

Overall, Walmart's global revenue rose 8.6% to $134.62 billion and net income rose 4% to $4 billion. Excluding gains on its investment in China's JD.com, earnings per share were $1.18, slightly better than Wall Street was expecting.

Shares rose 1% to $128.95 in early Tuesday trading. The stock has gained nearly 30% from a year ago and is hovering near a record of $132.33 reached last month.

Executives said the company was withdrawing its financial forecasts for the rest of its fiscal year, citing the uncertainty and restrictions caused by the virus. However, they said the company was well positioned to operate through the crisis and Walmart has benefited from bricks-and-mortar closures and slowing shipping speeds at some online players.

"It is a big advantage being an omnichannel retailer and I think that is showing right now. We had backups in our fulfillment centers too" but were able to quickly use stores to fill online orders, Walmart finance chief Brett Biggs said in an interview. "That is something that our competitors, they can't all do it."

Walmart said the number of new customers trying its online grocery pickup and delivery services grew fourfold since mid-March. Some of those shoppers will go back to old habits, Mr. Biggs said but "I think this time people are going to remember who was really there for them."

The coronavirus has forced many retailers to lay off staff and pushed some, already struggling with the shift to online buying and competition from Amazon.com Inc., over the edge. This month luxury retailer Neiman Marcus Group Inc., apparel seller J.Crew Group Inc. and J.C. Penney Co. have filed for bankruptcy protection.

Walmart has stayed open. The country's largest seller of groceries, which account for more than half of its U.S. sales, has benefited as shoppers purchase ground beef, toilet paper and cleaning supplies at its more than 4,700 U.S. stores. It has also struggled to keep up with the unprecedented demand. Inventory fell 6.1% in the quarter due to out-of-stock goods, Walmart said.

It isn't just Charmin toilet paper or Clorox wipes that are hard to find. With millions of people working from home, items such as office chairs and laptops have been cleaned out in some areas, said Chief Executive Doug McMillon.

"We are working intensely to improve in-stocks for high demand items and adjust order volumes," Mr. McMillon said. "We expect the environment to stay quite volatile in the coming months."

While overall consumer spending dropped sharply in March and April, the dollars flowed to those companies that sold groceries or were able to stay open, including Amazon and big chains such as Target Corp. and Costco Wholesale Corp.

On Tuesday, Kohl's Corp. posted a $541 million quarterly loss and 41% drop in revenue after it was forced to close its department stores. Meanwhile, Home Depot Inc. said its comparable sales rose 6.4% in the quarter but profit fell due to higher costs.

Like other open chains, Walmart said its U.S. sales spiked in March, then slowed during the first half of April. Sales of food and health-care products rose strongly, while sales of discretionary goods such as clothes didn't, the company said, mirroring trends seen across retail as buying habits shifted dramatically.

Longer-term "online sales will be higher, scale players will matter even more and Walmart by default will have a bigger share when this is done," said Simeon Gutman, retail analyst at Morgan Stanley. "The question is what happens to the margins."

The rapid growth in online sales in recent months "has stressed supply chains and it's definitely a lower margin way of doing business," said Mr. Gutman.

Strong sales helped offset additional expenses related to coronavirus, including a shift to lower-margin online sales and temporary closures of optical and auto care areas, Walmart said. The company cut expenses by spending less on company travel, consultant fees and marketing.

Walmart invested more to operate, including more to disinfect stores, dole out bonuses and higher pay to store and warehouse workers and rushed to hire additional workers since mid-March. As of last month, around 10% of Walmart's staff or 150,000 workers were on coronavirus-related leave, The Wall Street Journal reported.

The company, which has been checking staff temperatures before their shifts and giving them masks and gloves to wear, is looking at ways to start testing staff for coronavirus. "We are pursuing strategies for testing associates for the virus, including antibody testing," Mr. McMillon said.

Walmart has shifted its e-commerce strategy over the past year, cutting costs at several small websites it acquired in recent years to focus on building up walmart.com. It sold apparel seller ModCloth and cut jobs at Bonobos, another apparel brand, and Hayneedle, an online furniture seller.

On Tuesday, Walmart said it would close Jet.com, the e-commerce startup it bought for $3.3 billion in 2016. Initially, the deal was described as a way to challenge Amazon, but over time Walmart pared back Jet's staff and ambition. The deal put Jet.com founder Marc Lore at the head of Walmart's U.S. e-commerce businesses. Mr. Lore has stock incentives to stay with the company through fall of 2021.

Instead, Walmart has focused on adding third-party sellers to walmart.com, delivering online orders from stores and adding online grocery service to many stores. During the quarter Walmart started temporarily using about 2,500 stores to ship out online orders, said Mr. McMillon.

Write to Sarah Nassauer at sarah.nassauer@wsj.com

 

(END) Dow Jones Newswires

May 19, 2020 11:13 ET (15:13 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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