Despite economic challenges, Walmart is staying ahead of the curve.
The retail giant released its impressive first-quarter earnings report on Friday, which showed growth across the board.
Total revenue was equal to $161.5 billion, a 6 percent increase from its performance in the first quarter last year. Walmart also saw its net sales and adjusted operating income increase by 5.9 percent and 13.7 percent, respectively.
Barron’s also reported that increased purchases by wealthy shoppers and an increase in e-commerce sales are also driving Walmart’s sales up. The company reported that global e-commerce sales increased year-over-year by 21 percent.
Walmart has been battling with eCommerce giant Amazon over the past few years, in an attempt to reach a wider crowd. These figures suggest Walmart’s efforts haven’t been in vain.
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Walmart’s shareholders should also be pleased, as the company’s adjusted earnings per share increased by 22.4 percent.
“Our team delivered a great quarter. Around the world, our goal is simple – we’re focused on saving our customers both money and time,” Walmart President and CEO Doug McMillon said in the company’s news release announcing the earnings report.
Walmart executives acknowledged that, although their team performed well, increasing costs and economic constraints are driving people to spend less on things such as eating out, and more on stores like Walmart.
“It’s roughly 4.3 times more expensive to eat out than it is to eat at home,” Walmart Chief Financial Officer John David Rainey said to CNBC. “And that’s benefiting our business.”
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“We’ve got customers that are coming to us more frequently than they have before and newer customers that we haven’t traditionally had, and they’re coming into a Walmart whether it’s a virtual store online, or whether it’s one of our physical stores,” Rainey said.
CNBC also reported that Walmart’s stock rose to an all-time high on Thursday, closing at $64, as it beat out its quarterly earnings and revenue expectations.
At Thursday’s close, Walmart’s stock was up about 22 percent since the start of the year, CNBC reported.
When looking at Walmart’s performance, it may seem like, as President Joe Biden has been preaching, the economy is improving. Biden has consistently held that economic worries are overstated.
He told CNN earlier this month that he’s already turned the economy around and that “the polling data has been all wrong” in showing that people trust former President Donald Trump’s economic record more than Biden’s.
The president went on to claim that many Americans are “personally in good shape,” and that “they have the money to spend.”
Although Walmart had an impressive first quarter, it doesn’t show evidence that the economy is strong, as the president may suggest.
The gains are more indicative of Walmart’s business model than the state of the economy. CNBC noted that Walmart hasn’t been affected by inflation as much as other retailers, given that groceries account for more than 60 percent of its U.S. sales, and such sales do not decrease as drastically as sales in non-essential areas such as electronics and apparel.
Rainey indicated as much to CNBC, saying that shoppers have bought less general merchandise like electronics and apparel, as they prioritize their paychecks on feeding themselves and their families.
McMillon also indicated that the expansion of the company’s online business is a primary factor in increasing sales, although Walmart is trying to encourage shoppers to spend in departments that are more profitable for the company.
“We punched below our weight on general merchandise, specifically in apparel and home, for a really long time, maybe forever, and I think the progress we’re seeing right now is driven by the in-store remodels and e-commerce,” McMillon said.
Walmart is also trying to appeal to younger and wealthier families by introducing a new private-label grocery brand, Bettergoods, CNBC reported. Products will typically cost under $15, but will offer more diverse flavor and nutrient options, such as plant-based and dairy-free products, with the goal to increase profit margins in the company’s highest-performing area.
Walmart’s efforts at expanding its business in areas that benefit the public, coupled with the company’s ability to provide less expensive goods, are what’s really driving sales up, not an impending economic boom.
In fact, it’s precisely because the economy is doing poorly that Walmart is seeing growth.
And even if Biden might suggest the opposite, Americans aren’t siding with him. Seventy percent of Americans believe that economic conditions in the U.S. are poor, according to a CNN poll conducted by SSRS last month.
Walmart even admitted that its growth is attributable to the company’s low prices, as people have started to swap going out to restaurants for cooking at home, given how expensive the former has become.
So, no, Walmart’s first quarter performance does not show that Biden’s economic strategy is working. Rather, it’s because of the president’s poor economic strategy that Walmart saw the growth it did.
Once growth like Walmart’s is seen across multiple industries, then we can have an actual cause for celebration.
