We are building a different business and we are making progress.

It’s only a few months since Walmart scared the horses on Wall Street by turning in quarterly numbers that showed a 25% year-on-year drop in profits and e-commerce growth that had stalled to around one percent. So when CEO Doug McMillon makes the claim he’s just made above, it’s going to come in for some scrutiny.

The good news for McMillon and his team is that despite the inflationary and macro-economic environment pressures on the business, which have only got worse in the intervening months, there are indeed signs of progress. The firm’s US e-commerce business grew 12% during the most recent quarter, while Walmart’s share of the US online grocery market topped 55% in June, up from 52% in March.

All of which leads McMillon to argue:

Regardless of the inflation level and as we work through the places we have too much inventory, we continue to make progress on our strategy. We are becoming more digital, even more relevant as an omni-channel retailer and the related businesses, like fulfillment and advertising, continue to grow.

Delivering

Delivery and fulfilment improvements are playing a large part here. McMillon says;

The team is also working on getting items to customers faster, while lowering the cost of delivery through a significant increase in the number of orders fulfilled by stores. We have increased this volume by nearly 40% from a year ago. Speed matters, whether it’s how quickly we get items to customers or how quickly we scale new businesses.

Our white label delivery platform service, Walmart Go Local, will celebrate its 1 year anniversary later this month. Powered by our Spark Driver platform, I am excited about the growth I have seen so far and the expectations looking ahead. We passed 1 million deliveries so far with Go Local.

We expect to have about 5,000 pickup locations by year end and client satisfaction scores are strong. We continue to sign up larger scale customers and we are making strides on the bigger unlock, which are small and medium-sized businesses. Our technology and expertise will help so many of these businesses grow, while contributing to our operating margins over time.

Streaming

Membership of Walmart+ also continues to grow, although Walmart declines to disclose specific numbers. This should be given an additional boost next month when members receive a free Paramount+ subscription. A quick caveat here - the deal on offer will be for Paramount’s ‘Essential’ price plan which comes in at being worth $4.99 a month and includes commercials. (Paramount offers a non-ad driven plan for $9.99 per month.)

Still, John Furner, CEO of Walmart US, sees the Paramount tie-up as a competitive advantage and one demanded by customers:

The brand Paramount has a lot of programming for kids. It has live sports. There are other movies and drama. So, it’s a wide variety of content that I think our members will enjoy. And that was, quite frankly, a member-led research. When we talk to members and ask what are the benefits they were looking for, the number one feature outside of delivery of product from both stores and e-commerce was an entertainment benefit. There were others they talked about, but entertainment was at the top of the list, and that’s what led to the decision to add this benefit to the program.

All that said, the economic downturn still hangs heavy over the entire retail sector and that’s not likely to change any time soon. For his part, Furner reckons that Walmart has been here before and ridden out the storm:

There was a downturn in 2008, ‘09, but there are a few things that are different now that I think I would like to point out. In that time period, we had our store business and a small e-commerce business. We did not have food pick-up. We didn’t do delivery from stores. We didn’t deliver groceries. We did not have Walmart in-home. We didn’t have Walmart+. So, our ability to serve customers in a more flexible manner than what we could have 13 years, 14 years ago is pretty dramatic.

So, there’s definitely a lot of work to do to ensure that we are taking care of those customers and we are focused every week on satisfaction scores and accuracy of delivery and things like first-time pick rate, which is an indicator of did we get your entire order right at the very first time we try to deliver it? Those will all be important in terms of being able to hold on to new customers. But we definitely have a number of ways that we can serve customers today that just, quite frankly, did not exist the last time we went through a downturn.

McMillon’s shopping cart is also, inevitably, half-full as he concludes:

We certainly hope to hold share around the world. I think this inflationary environment is going to last for a while, so people are going to be value conscious, which plays to our strengths. The e-commerce experience end-to-end is a focus of ours. We want to continue to grow our pick-up and delivery businesses around the world. We, of course, want to grow and maintain share of customer spend in the stores as well.

My take

We have the potential to not only be relevant in the next chapter of retail, but help define it. 

That’s the bold claim made by incoming Walmart CFO John David Rainey. Maybe it’s the enthusiasm of ‘the new kid’, but it’s going to take more than a tie-up with Paramount to do that!

Certainly Walmart’s latest quarterly numbers this week will have done much to calm shattered nerves in the investor community, but given the overall grim economic outlook around the world, this bumpy ride is far from over.

Next up later today, Target announces its latest numbers. How they come out will do a lot to determine how the prospects for the retail sector in the second half of the year shape up.