Walmart's (WMT 75.12) first quarter results are in and they make it clear that the world's largest retailer is still holding its own in the face of increased competition from Amazon (AMZN 944.76) and deep discounters like Dollar Tree (DLTR 78.08) and Dollar General (DG 70.67).
The numbers themselves might not suggest as much at first blush, yet when a company is as big as Walmart, there is still an impressive quality to incremental growth. To that end, Walmart's consolidated net sales increased 1.3% to $116.5 billion. Total revenue, which includes membership and other income, jumped 1.4% to $117.5 billion.
The uplifting aspect of Walmart's report, however, was in its comparable store sales performance and the growth of its e-commerce business.
Excluding fuel, comparable store sales increased 1.4% at Walmart U.S., versus company guidance of 1.0-1.5%, and 1.6% at Sam's Club, versus prior guidance of approximately 1.0%.
The comparable sales gains were driven by increased traffic, which is something many retailers can't say these days, and a nice boost from the e-commerce business, which contributed approximately 80 basis points to the comparable sales increase at both Walmart U.S. and Sam's Club.
E-commerce growth at Walmart U.S. was significant, with sales and gross merchandise volume up 63% and 69%, respectively, the majority of which was organic through Walmart.com. That is an encouraging indication for investors since it speaks to Walmart's effectiveness in competing with Amazon, as well as its approach for driving a multi-channel sales platform to offset the secular shift of more consumers making retail purchases online.
Traffic, however, was up 1.5% at Walmart U.S. stores and up 1.1% at Sam's Club stores. The increase in traffic at its physical stores, then, combined with the strong e-commerce growth, supports the notion that Walmart's marketing efforts, merchandise assortment, and low-price leadership are resonating with consumers at a time when Amazon is taking market share from so many other retailers.
Walmart also gets credit for effective inventory management. Its inventories were down 2.6% year-over-year at the end of the fiscal first quarter, which is something that should help Walmart from being overly promotional (even for Walmart).
Walmart provided some reassuring guidance for its second quarter, saying it sees adjusted earnings per share between $1.00 and $1.08, which is in-line with analysts' average expectation. Importantly, though, it sees continued growth in its comparable sales, which, excluding fuel, are anticipated to be up 1.5% to 2.0% at Walmart U.S. and up 1.0% to 1.5% at Sam's Club.
Shares of WMT, which have risen 8.7% year-to-date, are up 1.0% in pre-market action.