Walmart (WMT 1.30%) investors are seeing some of the best growth they've witnessed from the retailer in years. Sure, the results are being pushed along by strength in the broader economy. However, it's also clear that remodeled stores and initiatives like grocery pick-up and delivery won back market share that Walmart had lost to rivals like Kroger in past years.
Back in February, management laid out a few areas of the business they'd like to improve, and this past week, the retailer showed solid progress on these challenges. Below, we'll look at a few quotes from the company's recent conference call with investors that illustrate how CEO Doug McMillon and his team see the operating environment shaping up today.
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Making lots of big moves
As usual, the team has been busy. -- McMillon
Since it is the world's largest retailer, you'd expect to see Walmart engaging in a few large-scale initiatives at any given time. But that disruption pace has ramped up significantly as the chain adjusts every part of its business to compete in a multichannel selling environment.
This past quarter was no different. Walmart added grocery pickup and delivery to hundreds of locations over the last few months, brought next-day delivery to much of its U.S. sales footprint, bulked up its private-brand food offerings, and added dozens of new brands both online and in stores -- to name just a few highlights. Management said in February that investors should expect to see the pace of change in the industry accelerate over the next five years, and this past quarter reflected that quickening stride.
Addressing shortcomings
We're making good progress in e-commerce. -- McMillon
E-commerce sales growth hasn't been a problem for Walmart, as the segment expanded by 43% over the holiday quarter. That positive momentum carried into the new fiscal year, with sales jumping 37% online.
The better news for investors is that Walmart found ways to boost profitability while growing quickly. Cost cuts and an expanding sales base helped, but the chain also succeeded in pushing into higher-margin product categories like home furnishings and apparel. These wins played a key role in allowing operating income to jump 5% in the quarter.
There's more room for improvement in each of these areas, too, and Walmart's path toward boosting profitability for the e-commerce business is getting clearer with each passing quarter.
Hoping for the best, but preparing for the worst
Overall, we're very pleased with the quarter. We're monitoring the tariff discussions and are hopeful that an agreement can be reached. Our goal is to always be the low-price leader, and we will actively manage pricing and margins as warranted with our customers and shareholders in mind. -- CFO Brett Biggs
Walmart navigated through several cost headwinds this quarter, including labor and general price inflation, to achieve healthy core profit margins. But the pricing environment could quickly worsen as more imports from China get slapped with tariffs in the weeks ahead.
If that happens, investors can expect Walmart to balance protecting profitability against winning market share, with the priority being maintaining the chain's price-leadership position. The good news is that tariff impacts to the business likely won't be severe since Walmart's buyers have been preparing for this situation for months.
In any case, investors will be eager to learn how demand trends held up -- and whether the retailer is changing its full-year sales growth outlook -- when Walmart announces its second-quarter earnings results in mid-August.
