Walmart knows that inflation plays an important role in its income because it depends on how much and what consumers decide to spend. However, just because the retailer’s customers are more financially constrained doesn’t mean the retailer has curbed its sales and profits.
According to its financial report sent to the Mexican Stock Exchange, the company’s revenues were 195,619 million pesos (mdp) during the second quarter of the year, which indicates a growth of 12%, compared to the same period of the year. last year.
Profits, on the other hand, were 10,892 million pesos, which represents an increase of 11.5%, while the operating flow or Ebitda reached 20,145 million pesos, 11.1% more than the same period of the previous year.
“We are experiencing higher cost of doing business; however, we managed to maintain the operating expense base and invest in strategic activities. High levels of inflation are not only affecting our clients’ pockets, they are also putting pressure on expenses,” said Paulo García, senior vice president of administration and finance at Walmex, at a press conference.
The operation in Mexico
From April to June 2022, Walmart obtained 162,587 million pesos in revenue, this indicates 12.2% more than the same quarter last year when it had 144,957 million pesos in sales. In addition, the operating flow was 17,201 million pesos, which reveals a growth of 10.5%.
Same store sales grew 10.8%, driven by Bodega and Sam’s Club. According to the report, Bodega was the format with the highest growth, since the company managed to increase the price differential against its competitors by 140 basis points.
In order to improve the perception of prices by consumers, the company launched the ‘There is for more’ campaign in this format, which focused on reinforcing and unifying communication with consumers.
It also tested a new design to improve and simplify the shopping experience in the perishable departments. This change increased traffic by 160 base points, so in June they began the nationwide implementation to boost traffic and sales in Bodega.
In the case of Sam’s Club, the company is launching new items to expand its catalog. During the quarter, the sales share of Members Mark, its own brand, increased 230 basis points compared to the second quarter of 2021.
Memberships still had a healthy performance. During the Hot Sale, Plus members reached a historical maximum of 40% participation. The frequency of purchase of plus members and the average ticket is 2.0 higher than that of individual members.
As for Walmart, the retailer says that it is good to see that after two years with less traffic in stores due to the pandemic, its seasonal events are now at their maximum potential, for example back to school, the soccer world cup and Christmas.
About Walmart Express, after several quarters with disruptions due to the conversion of stores, the retailer already sees more palpable growth. During the quarter, 200 more stores were converted and in the second half of the year the goal is to complete the remaining 11 conversions.
For this particular format, the supermarket chain held an event in April focused on organic products, where customers could find more than 100 products in categories such as fruits, vegetables, groceries and consumables. Thanks to this, sales increased by double digits during the event.
Performance by division
The company recognizes that inflation is affecting the performance of sales of general merchandise and clothing; however, groceries and consumables continue to grow solidly. “We know that high inflation in food affects the budget of our clients, especially the most price-sensitive ones, and we want to be there to support them. We strengthened the offer of the basic basket with products from our brands that, in addition to helping customers save money, increase their loyalty even more,” the document reads.
During the quarter, sales of own-brand self-service formats grew almost twice as fast as the rest of the business, increasing their share by 100 basis points against the same period last year. The company has a goal of doubling its share of sales by 2026.
The omnichannel strategy
Walmart continues to grow and expand the number of stores enabled with the on-demand service, as well as improving delivery times. Currently, 980 stores have this service in more than 200 cities.
To improve the user experience on apps and websites, the company has enabled a feature called Forgot Something?, which reminds customers of items they may have forgotten. This new feature is helping them increase the average ticket and, consequently, sales. In the last three months, sales of Despensa a tu casa grew almost 180%.
On the other hand, in May Walmart Pass had a 30% share. The frequency was almost two times higher than that of users who do not have the subscription. In addition, the retailer implemented the delivery service in 60 minutes in more than 280 stores. The company is using machine learning to provide a more accurate delivery promise to increase customer satisfaction.
And despite last year’s growth base and changes in buying habits, the e-commerce business continues to grow, as during the quarter e-commerce sales increased 18%, resulting in a contribution of 0.9 % growth in total sales. E-commerce sales represented 5.2% of Mexico’s sales.
On the other hand, the number of Cashi users doubled during the first half of the year, reaching 3.4 million. As for Bait, at the end of the second quarter they reached more than 4 million accumulated users, and in addition to its prepaid telephony and connectivity offer, the retailer is testing a model for companies in which they can provide strategic partners with a service lower cost.
Regarding the advertising division, Walmart Connect launched a new product to offer a broader selection of solutions: mobile advertising through Bait. The goal is for customers to be able to reach millions of users through text messages and push notifications, or target specific audience segments, thereby increasing the efficiency of their investments.
The operation in Central America
According to the report sent to the Stock Exchange, the countries of the region had double-digit growth in sales to equal units, resulting in a total growth of 14.6% in Central America.
The company is focused on driving the growth of the Bodega and Discount formats and simplifying its business. To do this, they are carrying out various actions to improve the shopping experience, including standardizing the communication of the campaigns to give a clear message to customers, as well as the perception of the price.
In addition to that, they are optimizing the catalog by reducing the number of items and increasing inventory turnover. Sales share increased 180 basis points versus the second quarter of 2021, indicating that the double-digit growth trend continues.
The ‘Champion Quetzales’ and ‘What you need paying less’ campaigns were well received by consumers in the region, resulting in a 25% growth in sales during the execution of these initiatives.
Total revenues were 33,032 million pesos, that is, they grew 15.3%. while the operating flow was 2,944 million pesos, with a variation of 18.7%.
The company’s goal is to double total sales in 10 years and leverage operating expenses to invest in the business. Sales growth will come from same unit sales, new unit sales and e-commerce.
During the quarter, Walmart opened 20 new stores: 19 in Mexico and one in Central America, the contribution of these new points of sale to the consolidated growth of total sales was 1.2%. As of June 30, 2022, the company operates 3,651 units in six countries: Costa Rica, Guatemala, Honduras, El Salvador, Mexico and Nicaragua.
