Walmart CFO: Shoppers still in stores, but wallets 'stretched' (2024)

Walmart (WMT) posted its first quarter report revealing a profit of $5.10 billion for the quarter and a 21% year-over-year growth in eCommerce sales. The company also posted its full-year guidance for 2025, with projected adjusted earnings of $2.23 to $2.37 per share. While the numbers showed a strong quarter for the retail giant, US retail sales were unexpectedly flat in April.

Walmart CFO John David Rainey joins Yahoo Finance Executive Editor Brian Sozzi to discuss Walmart's first quarter performance, the state of the consumer, and Walmart's movement toward tech.

Rainey characterizes consumer strength as relatively consistent: "Here we see that wallets are still stretched. They're still looking for value. They're still using discretion with buying those higher-income items. I think notably retail sales came out yesterday showing April was relatively flat. We think when we look at our business that that's largely the result of the Easter shift year over year from March to April or April to March, I should say, and also weather impacting the month as well."

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This post was written by Nicholas Jacobino

Video Transcript

Walmart shares gaining just about 6% in pre market training.

After the company reported very, very strong results, ecommerce sales fueling growth during the first quarter, the retail are now expecting its full year net sales growth to hit the high end or slightly top its previous forecast.

We have John David Rainey Walmart, the CFO joining us now alongside Yahoo Finance's executive editor, Brian Sazi John David.

It's great to have you here.

Thanks so much for making the time for us.

So let's talk about what was yet another strong quarter here for Walmart.

You've got shoppers clearly prioritizing value.

I'm curious what you read right now is on is on the consumer and some of the trends that you're seeing here in the current quarter.

Well, it's great to be on the show first.

Thanks for having me.

We are really pleased with the results.

This quarter grew, the top line 6% grew operating income over twice that amount at 13.7%.

And I really think it shows that customers are continuing to come to Walmart for not only just value but also convenience in terms of the consumer.

The consumer has been relatively consistent.

We are like everyone else is looking for.

Uh, if there's something there, something that we should be more aware of, but they've been pretty consistent quarter to quarter here.

We see that wallets are still stretched, they're still looking for value.

They're still using discretion with buying those, those higher income items, I think, notably, retail sales came out yesterday showing April was relatively flat.

We think when we look at our business that that's largely the result of the Easter shift year over year from March to April or April to March, I should say and also weather impacting uh the month as well.

So when we look at the quarter in total, as well as what we see in the first few weeks of May here, it's been relatively consistent.

Uh John David, good to see you again.

Uh Appreciate you coming on.

Is there?

I I really do think that investors are misunderstanding.

Uh what Walmart is today.

You know, I still think they, they think Walmart is a place to get cheap goods and maybe not everybody goes there and then there's that component, but the other component is here is just how much of a tech company the company has become.

Do you think they understand, you know how much value tech is driving at Walmart right now?

Yeah, there's so many examples uh Brian where we're using technology to help our customers and help our associates that are really leading edge and, and one of the examples I like to point to is the scan and go app that you have when you shop at Sam's fully a third of our customers are using this experience when they shop with us where they're, they're checking out with their mobile phone.

Um I, I don't know the data on this, but I would stand to believe that there's not many other examples of a digital experience in store that has a higher penetration than that.

And so we're really excited about that, but there are many, many examples of where we're leaning into technology to help not only our customers but also our associates.

In terms of how that translates into our financial results.

We had roughly a billion dollar increase year over year in our operating income.

Fully, a third of that came from these newer businesses like advertising, like membership, like data ventures, data ventures grew 100% year over year.

These are all higher margin businesses that are gonna continue to help our margins go up over time.

What do you like to reinvest those margins into the business?


Well, first and foremost in helping the customer have better experiences, we're always looking to uh be an advocate for our customer, whether it be low prices or better experiences, but we have a lot of opportunity in our fulfillment around supply chain.

We've invested a lot and we'll continue to invest a lot in automating our supply chain.

That's not just robotics, it's also software and technology that helps us to better distribute our goods and merchandise to our stores in a more seamless fashion in a less expensive way over time.

And that translates into lesser, less ecommerce losses.

And hopefully we'll get to a point where we see uh ee commerce profits.

One of the things I talked about on our call this morning that I am really excited about are the incremental margins in our ecommerce business.

And what what I mean by that is for every additional dollar of revenue that we had this year, how much of that fell to the bottom line?

So in a business overall, that is call it roughly a 4% margin business.

The incremental margins for ecommerce for us for the quarter were 12.5%.

So roughly three times the overall margin for the enterprise.

And so you look at that and to me that's a very compelling point that our margins are just gonna go up over time as we continue to grow these higher margin parts of our business.

There's, there continues to be just this focus in this country uh about inflation where it is where it isn't, you know, consumers, despite the dow breaking through 40,015 million plus jobs created over the past four years, households don't feel wealthy uh in large part because of inflation.

Are you seeing inflation slow down?

And do you see signs of a any signs of disinflation where prices are going to decline at any point this year and, and ease some of the pressures on households.

Sure, Brian.

So overall, if you look at the basket of goods that we sold in the, in the last quarter, inflation for us was about 40 basis points.

And so the takeaway there is that all of the revenue growth was driven by units by foot traffic.

And so we're really pleased about that and it shows that customers are really coming to Walmart within categories.

Not only do we see dis we see deflation in general merchandise.

It's been that way for a couple quarters, food and consumables are call it roughly 0 to 1% up.

And so when you look at uh P CE or the CP I print uh it's really um shelter and energy which is driving 70 to 80% of the of the increase in inflation.

If you focus in on food, I think there's a further disparity between food at home and food away.

That gap between the two has actually grown by 20% over the last five years.

It's 4.3 times more expensive to eat out than it is to eat at home.

Right now, John David going off of that one, I was looking at the quick uh analyst reaction to your print out this morning and I saw, I mentioned a couple of times that one of the challenges here for Walmart once inflation starts, uh what you were just talking about is the ability here to retain some of the new customers that you have won over the last several quarters.

What is your strategy look like for that?


Well, first and foremost, I'd say convenience.

We've been a company that's been known for low prices for six decades.

We're now being known for convenience and convenience matters to any household, irrespective of your income level.

We continue to see progress in e commerce that grew once again, over 20% for us this quarter, but it's not just customers that are shopping with us online and then going to the store to pick it up the last two months.

We've actually seen delivery outpace uh store pickup.

And if you look over the last 12 months, we've shipped 4.4 billion items in the same day or the next day.

And over 20% of those have been within three hours just lastly.

And we only have about 30 seconds left here if you're monitoring the data as well as we are on the economic side and whether that be retail sales or CP I, we're looking at some of these department stores that are flailing right now and trying to figure out what their strategy is.

How much share do you think you can take from them as they're trying to figure out what their next iteration of growth is?

And, and how do you retain some of those customers you might be able to pick up.

Well, I think there's a couple of points to, to focus on here and I, I'm not, I, I don't know what uh other retailers are doing.

We're focused on serving our customers the very best way that we can.

And if we do that, well, if we execute, well, I think we'll continue to see Share gates.

The other point is, I think you're seeing how an omni channel model resonates with customers.

It's one thing to have a, an E commerce site that's really good.

It's another thing to have a brick and mortar site that's really good.

But combining those two is what's resonating with customers and we're seeing that in our results, Jon David Raine, who is the Walmart CFO alongside Yahoo Finance's executive editor, Brian Zazi Jon David.

Thanks so much for taking the time here.

My pleasure.

Walmart CFO: Shoppers still in stores, but wallets 'stretched' (2024)
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