Bentonville, Ark. – In recent weeks, Walmart US has captured more business from middle- and upper-income shoppers. But they mostly stick to the food and consumables aisles.
For the second straight quarter, general merchandise sales were down around 10 digits, with particular weakness in electronics, apparel and home products. The strongest categories were automotive, lawn and garden, and back to school.
At Sam’s Club, the home and apparel division performed in the low teens, led by strength in apparel, outdoor living, seasonal products and toys.
Key merchandising takeaways from this morning’s Q2 call with investors:
Destocking. By the end of the second quarter, inventories were down 15 percentage points, but Walmart continues to face excesses in electronics, home and sporting goods. “We also wrote off billions of dollars of inventory to align with anticipated demand,” said John David Rainey, EVP/CFO.
Selective investments. Traders reassessed demand subcategory by subcategory, canceling orders in the process in some cases. Walmart Inc. President and CEO Doug McMillon said the company will always bet big on items it expects to pay for, citing Halloween inflatables as an example. “You don’t want to get into an overly defensive mode,” he said.
Merchandise from the second half of the season. Fall and holiday products are novelty-driven and strongly biased towards opening prices. “We expect inflation to continue to influence the choices families make,” McMillon said.
Look forward. Walmart US’ overall business is much stronger than it was in 2019. “Next year we’ll see buying levels more in line with how we see demand moving in terms of the mix today. today,” said John Furner, President. and CEO of the division.
Walmart Inc.’s total revenue for the quarter was $152.9 billion, up 8.4% or 9.1% in constant currency. Operating profit fell 6.8% to $6.9 billion.