By Neil Saunders
Although unfavorable exchange rates softened Walmart’s overall revenue growth, the company nevertheless ended its fiscal year on a positive note. Walmart US posted a 4.6% uplift in total sales—with growth aided by various digital acquisitions—and a respectable rise in comparables. On the bottom line, despite extensive investments, Walmart pushed up operating income by 35.8% for the quarter.
The U.S. remains the star of the show and is performing incredibly well for a mature business operating in a highly competitive market. Our own data show that Walmart was a key destination for holiday shoppers over the quarter, in both food and non-food categories. Convenience and low prices—where Walmart continues to lead despite the rise of discount and value formats—were key reasons for the company’s success.
Grocery pickup brings holiday cheer
Convenience is now about much more than being able to do a one-stop shop at a fairly local store; it extends to allowing customers to seamlessly shop across channels. In this regard, Walmart performed well this holiday season with a heavily advertised range of services for online shopping and shipping. These were well received by customers and were one reason why Walmart’s scores for convenience and ease increased over the prior year. In particular, the expansion of grocery pickup and delivery services proved popular with festive shoppers.
The win for online, where sales grew by a market-beating 43% in the U.S., is also due to a more rounded digital offering. This includes various acquisitions Walmart made that allowed it to perform better in specialist categories like plus size or sporting goods.
However, changes to the main website, such as expanding the assortment and creating more visually appealing product pages, have also played a big part in making Walmart a destination for online shoppers. Walmart is successfully broadening its online base of customers and is now attracting both younger and more affluent demographics. These are early days, but as we have noted before, Walmart is a serious contender in the online space and presents a much more serious threat to Amazon than it did 18 months ago.
BOPIS stimulates footfall
In stores, the refurbishment of around 500 shops over the course of 2018 created more pleasant and engaging shopping experiences, which has encouraged visiting. The linking of online sales to stores via pickup services has also stimulated footfall. This underscores the fact that Walmart is successfully sweating both its online and physical assets to create a joined-up shopping experience—something that gives it a major advantage over more digitally biased players, like Amazon.
Looking ahead, Walmart faces some negative headwinds. Most of these are on the cost side with areas like tariffs, wages, and logistics all under pressure. However, these challenges are counterbalanced by opportunities. These come in three flavors.
First, Walmart is investing heavily in innovations such as automated grocery picking and delivery—measures that will reduce costs and improve efficiency. Second, despite strong growth, there is much more runway to boost digital sales. Third, a host of international opportunities from India to China have solid potential. All of these things will ensure Walmart remains a retail leader as it enters the choppier waters of 2019.
Neil Saunders is managing director of research firm GlobalData Retail.