Booming demand for groceries and essential items lifted Walmart Inc’s first-quarter profits, even as the company has struggled amid the COVID-19 pandemic to replenish key items like toilet paper and cleaning supplies.
“Our supply chain is amongst the most capable in the world, but in this environment we have stretched it,” said Walmart CEO Doug McMillon, who estimated that US inventories were down about 8 percent at the end of the period.
“Job No. 1 in the US is to get back in stock,” McMillon said on a conference call with analysts on Tuesday.
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Walmart’s e-commerce business surged a staggering 74 percent in the quarter ending April 30, with homebound customers opting for grocery delivery at home or for click-and-pickup options at stores.
This included an influx of new customers drawn to Walmart’s broad product slate, many of whom have become repeat customers, executives said.
Profits rose 3.9 percent to US$4 billion on an 8.6 percent increase in revenue to US$134.6 billion.
Walmart hired 235,000 workers in the quarter in the US, the majority on a temporary basis to boost its stores and supply chain, McMillon said.
The COVID-19 crisis led to US$900 million in additional costs, including spending to equip staff with masks and sneeze guards at checkout stations, and to launch or expand programs such as curbside pickup and mail-to-home service for pharmacy sales, Walmart said.
Walmart chief financial officer Brett Biggs said that he expects the spending to be comparable in the second quarter, adding that “there’s going to be some expenses that carry on probably for some time.”
Some items such as cleaning supplies are still below targeted levels, although the company has replenished in some categories, executives said.
Prices of meat also have increased due to a temporary shutdown of some US slaughterhouses, although that pressure might ease as the plants are brought back on line.
After the initial run on household staples, Walmart saw consumers throng to sometimes unlikely items that have taken off in the social distancing era, including adult bicycles for parents to accompany kids on rides; bandanas and sewing machines for homespun masks; and supplies for working at home, such as office chairs and laptops.
Meanwhile, the company announced that it was discontinuing Jet.com, which it acquired in 2016 as part of an effort to build up the chain’s online business.
The move reflects the “continued strength of the Walmart.com brand,” the retailer said.
The retail giant joined a large number of publicly traded companies to withdraw its annual profit forecast, citing “significant uncertainty” on the duration of the COVID-19 crisis, its effect on consumer confidence, and the cadence and duration of US government emergency payments to consumers.
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