Walmart Ecommerce Sales Rose 74% in First Quarter - Shuts Down Jet.com

Walmart First-Quarter Ecommerce Sales

Walmart said that its first-quarter e-commerce sales were up 74% due to grocery pickup and delivery and added that it is discontinuing Jet.com, which was acquired in 2016.

Marc Lore, the former Jet CEO, now CEO of Walmart's US e-commerce group was on the retailer's earnings conference call.

The retail giant has fared well during the COVID-19 pandemic due to investments in digital transformation and the ability to ramp e-commerce operations.

While expenses in the first quarter were higher, Walmart still delivered a consolidated operating income of $5.2 billion, up 5.6% from a year ago.

Walmart said it's US e-commerce operations also curbed its losses.

Like Amazon, Walmart is one of the primary retail winners during the pandemic.

Walmart First-Quarter Highlights

The company’s net sales and operating results were significantly affected by the outbreak of COVID-19. Unprecedented demand for products across multiple categories led to strong top-line results. Certain incremental costs negatively affected operating income, including costs associated with enhanced wages and benefits as well as safety and sanitation.
Total revenue was $134.6 billion, an increase of $10.7 billion, or 8.6%. Excluding currency, total revenue would have increased by 9.7% to reach $135.9 billion.
Walmart U.S. comp sales increased by 10.0%, led by strength in food, consumables, health & wellness, and some general merchandise categories.
Walmart U.S. eCommerce sales grew 74% with strong results for grocery pickup and delivery services, walmart.com, and marketplace.
Due to the continued strength of the Walmart.com brand, the company will discontinue Jet.com. The acquisition of Jet.com nearly four years ago was critical to accelerating our omnichannel strategy.
Sam’s Club comp sales increased by 12.0%, led by in-club transactions. eCommerce sales grew by 40%. Reduced tobacco sales negatively affected comp sales by approximately 410 basis points.
Net sales at Walmart International were $29.8 billion, an increase of 3.4%. Changes in currency rates negatively affected net sales by approximately $1.3 billion. As a reminder, with the exception of Canada, all other international markets report on a one month lag.
Consolidated gross profit rate declined 66 basis points primarily as a result of the carryover of investments in price from last year, a shift in the sales mix to lower-margin categories and channels as well as some markdowns in general merchandise.
Consolidated operating expenses leveraged 62 basis points despite incremental costs related to COVID-19.
Consolidated operating income was $5.2 billion, an increase of 5.6%, and included lower losses in Walmart U.S. eCommerce compared to Q1 FY20. Excluding currency, operating income would have increased by 6.6%.
Adjusted EPS excludes only the effects of an unrealized gain of $0.22, net of tax, on the company’s equity investment in JD.com.

Walmart CEO Doug McMillon explained the Jet shutdown on the retailer's earnings conference call.

Our tech teams are continuing to execute. For example, we've launched more than 70 new or accelerated capabilities in response to the virus. We've done this while staying focused on core products, like one app and Express Delivery as well as building out the next-gen tech stack. We talked to you in New York about that a bit.

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Even as we continue to drive our strategy, we're maintaining discipline. We're reducing expenses in areas outside of the stores and clubs like hiring above store level, management consulting services, and, of course, travel. We're continuing to review other areas of the business for efficiency opportunities.

One decision we've made is to discontinue Jet.com. While the brand name may still be used in the future, our resources, people, and finance have been dominated by the Walmart brand because it has so much traction. We're seeing the Walmart brand resonate regardless of income, geography, or age.

The Jet acquisition was critical to jump-starting the progress we've made in the last few years. Not only have we picked up traction with pickup and delivery, but our Walmart.com nonfood eCommerce growth accelerated after the arrival of Marc (Lore) and the Jet team. He leaned into the Walmart brand quickly. We don't anticipate a significant accounting charge due to this decision, and the vast majority of associates have previously been assigned to the Walmart brand.

Marc Lore added that Walmart is building out its third-party marketplace and seeing strides in growth and driving e-commerce profitability. Ultimately, Walmart plans to offer a broad assortment of product categories. Lore said:

There are a number of things that we've done during this period to create a healthy business coming out of it. Some of the things that we know we need to do long term to continue to curb these losses keep the fix growing at a low rate when we grow sales at a high rate, driving mix into the marketplace, which is driving mix into higher-margin categories, like home and fashion. And that means that we needed to continue to add brands.

This is of a particularly good period of stretch for us. We're adding a lot of really good brands said Lore.

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