Vaccine Economy reality has kicked in at Walmart as e-commerce growth slows to as low as one percent while inflation, COVID, the global supply chain crisis and over-staffing as employees returned from sick leave more quickly have taken their toll on the world’s largest retailer.
Add to that a fire at one of the firm’s largest distribution centers and it was a markedly more downbeat Doug McMillon who stepped up as CEO to explain away a 25% year-on-year drop in Q1 profits to $2.1 billion. Overall revenues rose 2.4% to $141.6 billion.
Of the e-commerce growth, McMillon commented:
Overall, e-commerce growth increased about 1% for the quarter. We're making progress on the e-commerce experiences as in-stock improves and the team continues to improve on the app and site experience, and delivery accuracy and speed.
Our e-commerce operations were affected early in the quarter as we lost one of our largest fulfillment centers to a fire, which created some cost inefficiencies for us. The buildings were destroyed but thankfully and most importantly, no one was hurt.
The loss did put a strain on our system, however, the team quickly reacted to utilize our stores and spread volume to our other FCs to fulfill e-commerce orders.
John Furner, President and CEO of Walmart US, added:
It was a large fulfillment center in our network. The positive out of that is we have a lot of stores and we have other fulfillment centers and went [to them in] about 72 hours. The team was able to re-route the majority of the orders into other places in the country. There are certainly some logistics costs with doing so because it was such a big center, but they moved relatively quickly.
There was some top line impact, as you can imagine in each of these centers, particularly with our assortment, including our fulfillment services, there are unique items that are in each of those facilities…Just like our lead times are long in general merchandise so are that of our suppliers and our sellers.
He also noted that the one percent growth for e-commerce was on par with that of Q4, which may or may not indicate a new normal:
We definitely had pulled forward in growth over the last year or two given all the stimulus and change in consumer behavior. Stores were strong in the first quarter, but what we're seeing so far in the month of May is strength in both channels. So it's like the growth is more evenly spread at least up to this point.
The one business unit to provide some cheer was Sam’s Club, the members-only warehouse operation, where e-comm growth was 22% year-on-year. CEO Kath McLay said this growth came from:
…a really nice blend of curbside, which we launched 18 months ago and as well as direct-to-home and traffic really strong into the clot at 10%. So really nice blend of members shopping us across all channels.
There were some things that happened during the quarter that were different than what we expected…There is a lot of uncertainty looking forward. Things are very fluid.
Wall Street inevitably didn’t like what it heard from Walmart. Two questions now - (1) are we seeing Walmart’s omni-channel balance in the Vaccine Economy settling down? (2) Will Target’s digital dominance continue apace or will it also be impacted by the same macro-pain as Walmart? We'll find out the answer to the second of those later today...