Inside Walmart’s Growing Business
Walmart has reported growth across most of the company’s business units. As a result, the company’s gross profits are up by 0.5% on a consolidated basis.
- Revenue. The company's total revenue for the quarter reached $134 billion, up 5%.
- Net Income and Operating Income. Walmart has increased its operating income to $22.3 billion for the twelve months ending on October 31, 2020. That's an increase of more than $1 billion compared to last year.
- Ecommerce. Ecommerce is growing quickly. However, it remains a relatively small part of the business. Overall, ecommerce sales contributed 14% of net sales. In Mexico, ecommerce net sales increased by 201%. In Walmart Canada, ecommerce sales increased by 177%, a growth driven mainly by online grocery.
- International Revenue. In contrast to growing US sales, Walmart’s international growth rate is slowing down. The international business segment grew by 1.3% to $29.6 billion in net sales; International growth is driven by its Canadian presence (408 stores in Canada), Flipkart, and Walmex (2407 stores in Mexico). Flipkart is an ecommerce company based in India, and Walmart has invested over $1 billion in it.
Household Essentials Drive Walmart
While Walmart can grow revenue in multiple areas and regions, consumer behavior is changing. In Sam's Club, Walmart's equivalent Costco consumables sales are up by more than 20%. This category includes paper goods, beauty products, and laundry. In addition to these house products, frozen meat and produce are selling well. Furthermore, Sam's Club also shows an increase in health and wellness sales.
Walmart has mostly been successful in adapting to the impact of COVID-19. In Q3, the company has completed a reopening of its Vision Centers. Furthermore, the company's pickup and delivery services are growing to record heights. In general merchandise, Walmart's reports increased sales of electronics, sporting goods, and toys. However, there were fewer sales of back to sale stationary goods.
Walmart Slows Store Expansion
For years, Walmart has expanded its business by opening new stores. That strategy has slowed significantly in 2020. In the US, the company opened only one new store in the third quarter. Instead, the company has focused its resources on changing its existing stores. The company has added same-day delivery series to 2,900 stores (i.e., 61% of US stores) and pickup service to 3,600 stores (i.e., 75% of US stores).
While the company has come a long way in adapting, it still has room to grow. There are still hundreds of stores that have not been adjusted for pickup and delivery service. And although COVID-19 vaccine announcements are promising, large scale distribution is likely months or years away. Therefore, Walmart is expected to continue to expand its commitment to delivery and pickup services. Walmart has more than 130,000 employees working in the pick-up business. The number of employees dedicated to pickup services has doubled over the past year.
Walmart Forecasts a Different Holiday Season
With Thanksgiving and Christmas weeks away, Walmart is forecasting a different kind of holiday season. Rather than focusing customer attention on a single massive promotion like Black Friday, the company is taking a different approach by planning a promotion called “Deals For Days.” This promotion will offer deals over a more extended period.
The company expects customers to continue to buy online, use delivery, and pick up services for the 2020 holiday season.
Walmart Store Hours Remain Restricted
Walmart has changed its operating model to respond to the COVID-19 pandemic. Specifically, the company has pulled back on 24-hour opening hours and has reduced opening hours by one hour for non-24 hour stores.
The company’s limited store hours are also part of the company’s employee engagement strategy. John Furner, CEO of Walmart US, commented about the company’s leave policy in a call with analysts:
“The reduction in hours in the first and the second quarter were primarily to ensure that associates were able to cover the stores as needed, we also had changed our leave-of-absence policy which enabled associates to take off any time they needed, if they weren't feeling well or if they needed to stay home.”
Walmart Launches Amazon Prime Competitor
In September 2020, Walmart launched Walmart+. The membership program costs $98 per year or $12.95 per month. Members receive free delivery, discounts on fuel, and other services. The program is Walmart’s answer to Amazon Prime, which also offers unlimited free delivery to customers.
About the Author
Bruce Harpham is an author and marketing consultant based in Canada. His first book "Project Managers At Work" shared real-world success lessons from NASA, Google, and other organizations. His articles have been published in CIO.com, InfoWorld, Canadian Business, and other organizations. Visit BruceHarpham.com for articles, interviews with tech leaders, and updates on future books.