Walmart blows past expectations for the first quarter

Walmart raised its annual earnings forecast on Tuesday after delivering better-than-expected results in the first quarter as the nation emerges from the pandemic

Sales at stores opened at least a year rose 6%, slowing from the 8.6% increase during the fiscal fourth quarter. But it topped last year's 10% spike when Walmart turned into a pandemic lifeline for millions of people. Online sales rose 37% down from its 69% during the fourth quarter.

"Our optimism is higher than it was at the beginning of the year," said CEO Doug McMillon, when the retailer swung to a loss partly due to costs related to the pandemic.

Walmart International, which includes retail operations in Canada, China, Mexico and Central America, reported $27.3 billion in net sales, a decrease of $2.5 billion, while e-commerce sales increased 49%. Net sales were negatively impacted by $4.2 billion, or 14.1%, related to recent divestitures. Changes in currency exchange rates positively affected net sales by approximately $0.9 billion.

Walmart has pushed further into fast and convenient delivery over the past year and sales at its stores were elevated with so many other retailers forced to close during lockdowns. Even the massive infrastructure put into place by Walmart in recent years were strained by the crush of orders from millions of people sheltering at home.

It bumped up spending by US$14 billion to speed up its distribution network and in February said it would raise its average hourly wage to more than $15 per hour, a $1 increase. Amazon and Target have already increased hourly wages to $15 for all workers.

First quarter net income was $2.73 billion in the three month period ended April 30. That compares with $3.99 billion in the year-ago quarter. 

Sales rose 2.6% to $137.16 billon. Analysts were expecting $132.16 billion.

Walmart said it expected earnings to increase in the high single digits; previously, the company had projected a slight decline in profit for the year.

Walmart is still faced with plenty of challenges. Analysts believe sign-ups for Walmart Plus, a membership program costing shoppers $98 annually, or $12.95 per month, are slowing. The retailer is hoping it will be a big competitor to Amazon's juggernaut Prime free shipping program, launched 15 years ago. Walmart Plus gives members same-day delivery on 160,000 items, a fuel discount at certain gas stations and a chance to check out at Walmart stores without having to wait at a register.

McMillon told analysts during the earnings call on Tuesday that what's driving memberships is grocery pickup and delivery, and capacity is an issue. He said right now the focus is on the quality of that experience, not the quantity.

On Friday, Walmart said it would no longer require vaccinated shoppers or workers to wear a mask in its U.S. stores unless state or local laws say otherwise. It's offering workers a $75 bonus if they are vaccinated.