Walmart Earnings: Tem-who? Amaz-who? Get Behind the Retail Leader
Walmart reporting Q1 FY2025 earnings and in doing so, flexed on the market. Overall their message over the past year has been consistent: grow operating income faster than earnings.
Their performance and forward guidance reflected this as well.
What are Walmart’s key Q1 FY2025 results?
Comparable store sales up 3.8%.
Consolidated operating income grew 12.9% constant currency.
Strong eCommerce growth of 22% (pretty much best in class).
What contributed to Walmart’s operating income improvement?
Here are a few takeaways:
One-third of operating income improvement came from newer businesses: ads, membership, data. Walmart+ Membership grew double-digit.
These new business opportunities are 12% net margin and 3x normal business.
40% reduction in ecommerce losses y/y, likely due to fulfillment/ship from store improvements mostly, but also ad revenue, etc.
Marketplace 36% more sellers on platform y/y, with 28% using Walmart fulfillment services.
50% of Walmart advertiser growth came from Marketplace sellers. (!!)
Pay to play coming to a new marketplace near you.
Which product categories showed significant growth in Walmart’s Marketplace?
Marketplace sales in furniture, sporting goods, kids apparel, and home grew more than 20%.
What is Walmart’s full-year guidance?
Projecting 5% top-line growth and 8% operating income growth. Should be at higher end or (likely) above full year guidance.
What lessons can businesses learn from Walmart’s strategy?
If you are going to invest, you prefer to invest in higher-margin activities than your current business. Advertising, Memberships, Data are all higher margin activities. Too many companies I see their second and third products are lower margins than their original ones. The marginal use of your employee's time diminishes this way, and it's often a road to abandoning those plans: see Facebook and eCommerce, Shopify and logistics. Even Klaviyo and SMS has me worried about their margin profile -- even if they "win" they lose.
Y/y inflation in the quarter only accounted for 40bps of the growth. The rest of their growth is true share gains/wallet growth.
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