Walmart U.S. reported strong quarterly results to kick off its new fiscal year: Comps increased 3.4% for the highest Q1 comp in nine years. Grocery was particularly strong, posting a mid-single-digit positive comp as Online Grocery was a “meaningful” contributor to eCommerce growth, and private labels also continued to gain. Among the other key highlights:


eCommerce remains a consistent growth driver: Online sales made up about 41% of the comp (140 basis points), with particular strength in Online Grocery as well as in Walmart’s areas of investment online, such as home and apparel. Walmart also made a notable change to its nomenclature on “traffic” to include eCommerce transactions, and will now report “comp transactions” instead of “comp traffic” to encompass performance across its full omni offer.


Efficiencies at the store continue to provide crucial fuel for the rest of the business: CFO Brett Biggs said the productivity loop is “certainly alive” in the retailer’s stores division, which leveraged expenses for the ninth straight quarter, this time “by a significant amount.” Still, eCommerce did also leverage expenses this quarter.


Reversing trends, inventory grew, while U.S. gross margin increased: In the midst of Walmart’s continued efforts to tighten inventory and drive efficiencies in stores, inventory grew by 5.9% during the quarter. The retailer stocked up for the summer and boosted eCommerce inventories across its six fulfillment centers in continued efforts to boost eCommerce profitability (as well as to source its new NextDay delivery service).


Meanwhile, Walmart’s margin rate in the U.S. rose by six basis points, the first increase in eight quarters. The retailer’s price investments only partially offset the gains from private label strength, less pressure in transportation costs, and improved eCommerce margins. Elsewhere on the pricing front, Biggs’ comments to reporters that new tariffs may result in higher prices grabbed headlines. Discussions around tariffs are sure to be challenging for Walmart and its vendors alike, and we will be watching those macroeconomic and global developments closely.



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