Preview: Walmart Earnings Focus On Grocery And Digital Shift

Online grocery and eCommerce will be on the radar when Walmart reports its second quarter earnings on Tuesday (Aug. 18).

Analysts expect a minimal jump in same-store comparative sales and the stock will most likely take a hit because of it. But the more intriguing storylines surround the follow-up to its 74 percent spike for eCommerce in Q1, and the potential for information around the launch of the Amazon Prime competitor, Walmart+.

First, eCommerce. It is highly unlikely that Walmart will match its 74 percent year-over-year spike, simply because consumers have been going back to the in-store environment. It will be more interesting to see if it can keep the quarter-over-quarter growth rate at a high level, even if it’s not at 74 percent. Some analysts have pegged the year-over-year growth at 60 percent, but even that could be high. The digital shift and Walmart’s ability to meet its demands have been on the plus side of many analyst recommendations, including one from Stephens Inc. Analyst Ben Bienvenu.

“We felt that Walmart was well positioned heading into calendar 2020, with line of sight to expense leverage and accelerated earnings growth set to deliver on the next leg of the value creation story [that] management had laid out for investors,” Bienvenu wrote. “Once COVID-19 showed up, the playbook clearly changed, but Walmart is unquestionably a winner in this environment, and we think the accelerated maturation of the eCommerce business will only enhance Walmart’s advantage relative to other grocers/retailers, and could help close the gap with Amazon.”

Next, grocery. Walmart made a huge move last week by linking up with Instacart to grow its grocery and eCommerce business and to compete against Amazon. But Kroger, which is also building its eCommerce capability, has opened a new beachhead against both Amazon and Walmart with its new marketplace building deal with Mirakl. Couple all this with the debut of Express Delivery this summer, which offers home delivery of a wide range of groceries and other products from the store in less than two hours. According to Supermarket News, Walmart expects to have Express Delivery in 2,000 stores, an expedited timeline in response to the pandemic.

“Before this crisis, we were already seeing robust adoption of online pickup and delivery,” said Doug McMillon, Walmart CEO, in a call with analysts in May. “As this crisis created a need for social distancing and required people to stay at home, customers embraced pickup and delivery even more. Pickup and delivery are attracting greater numbers of new customers. The number of new customers trying pickup and delivery has increased four times since mid-March.”

Finally, Walmart+. The company’s website says “coming soon” — and at some point, Walmart has to deliver on that. Will it use an earnings call to do so? Probably not. The launch has to be a consumer event full of in-store signage, consumer advertising and consumer press exposure. It is evident, though, that the launch will be regional, maybe even limited to specific metros where Walmart has strong grocery and delivery. That cancels New York City, and probably cancels a major announcement Tuesday.