When Walmart (WMT) opens its books this week, investors might get a better picture of how the industry adjusted to the vagaries of the coronavirus pandemic in the early days of summer. And during the company’s post-release conference call, some analysts may be listening for clues as to the direction of consumer spending trends.
That’s a heavy load, but as the world’s largest brick-and-mortar retailer, WMT is seen as uniquely positioned to do that. The retailer’s 10% sales growth in Q1 2020 helped demonstrate how its heavy investment in e-commerce and its wide array of stock keeping units (SKUs)— they’re really just all the different products—may have paid off at a time when consumers were homebound, hoarding, and shopping online or using curbside pickup.
But that’s also when WMT was one of the few retailers considered “essential” and allowed to keep its doors open because of its large grocery component while the vast majority were shuttered.
Analysts said WMT’s robust results in Q1 and its ability to pivot to limited store hours with stiff social-distancing dictates, as well as provide delivery and curbside pickup en masse—during a period when even e-commerce giant Amazon (AMZN) had a few stocking and delivery hiccups— might have given it some market share in Q1.
But Q2’s results could be a whole different story, according to a number of analysts who expect to see that WMT’s sales, like many others besides AMZN, tapered off as more cities and states began to relax stay-at-home mandates and more retailers (i.e., WMT competitors) got back to business.
Many analysts see WMT’s operating costs as having risen—even vs. Q1’s pandemic-related outlays—meaning profit margins could be pressured again.
On average, analysts are expecting to see overall sales rise to $135.4 billion vs. $130.4 billion a year ago but projected costs could pull net income down to $3.6 billion from $3.8 billion last year, according to FactSet.