Walmart’s total revenue grew 10% in the third quarter of the year. But this time the sales growth wasn’t an immediate reflection of the retailer’s omnichannel strategy, but of seasonal events like Valentine’s Day and the Super Bowl.
According to the financial report sent to the Mexican Stock Exchange (BMV), on the weekend of the Super Bowl, Bodega sold 4 million beers and almost 700,000 snacks. This favored that, in the third quarter of the year, the low price retailer obtained revenues of 187,844 million pesos (mdp), against 170,757 mdp in the same period of the previous year.
Its profits went from 10,070 million pesos to 11,109 million pesos, which translates into an increase of 10.3%, while the Ebitda or operating flow increased 6.4%, going from 19,475 million pesos to 20,723 million pesos.
In Mexico alone, Walmart’s revenue grew 10.2% and went from 141,032 million pesos to 155,387 million pesos. The operating flow, on the other hand, grew 6.4% and went from 16,468 to 17,523 million pesos. According to the report, electronic commerce contributed 0.8% to the growth of total income in the country.
Likewise, the growth of same store sales grew 9%. The South and North regions had the greatest same-store sales momentum, while the Metro region had lower but still strong growth.
At the Central American level, the retailer also had growth. Ebitda grew 7.9%, while revenues went from 29,725 to 32,457 million pesos. In this case, revenues were driven by the 9.7% growth in same store sales and the Bodega and Discount formats, which continue to be key for the company.
In the region, general expenses grew 9.4%, as the company’s focus is on cost efficiency in areas such as energy and water consumption, digitalization, through the introduction of new tools and redesign of reports, such as in the flow of merchandise and labor productivity, through the simplification of processes, training and improvement of forecasts in the templates.
The strategy to follow
For Walmart, the long-term strategy is synonymous with gradual growth, since the company’s intention is to double its total sales in 10 years and leverage operating expenses to reinvest in the business. By format, Bodega is the main vehicle for serving the most price-sensitive customers and earning discounts.
During the quarter, the company worked to simplify the execution and communication of marketing guides. The bet was on reinforcing the offer of own brands, which led to an increase in their participation in sales by 60 basis points compared to the first quarter of 2021.
After Walmart, Sam’s Club had the second-best same-store sales growth. The focus was on including products from the Members Mark brand, whose penetration grew 230 basis points against the same quarter last year.
Plus members are being offered free shipping on orders over 1,499 pesos. During the quarter, these partners represented almost 40% of renewals and affiliations. This is great news for Sam’s Club, as plus members have a ticket twice as high as the average ticket and their purchase frequency is 1.4 times higher than members of other memberships.
Walmart Supercenter also had significant growth. In March, they launched a new program called Omnichannel Merchant to support the on-demand operation. Walmart Express is still in progress. So far, 86 stores have been converted and in the coming months the plan is to convert 13 more stores. According to the financial report, the Superama stores that became Walmart Express are showing a positive trend and even exceed the level of sales they had before the conversion.
The analysis and reengineering of the catalog for online purchases was also completed and the offer was adjusted so that customers can find more products. The categories included are growing 1,300 base points more than they did before this process.
On the other hand, Pick Up’s share of total online orders increased 850 basis points from last year and more than 35% of store transactions go through self-checkout stations.
Performance by division
Groceries and consumables had double-digit growth and in March the initiative ‘The basics of your basket’ was launched to continue supporting the most price-sensitive customers. Despite the period of high inflation, the idea is to offer a basket with more than 50 food and personal care products, leveraging opening price points and own brands with affordable prices.
The performance of general merchandise was driven by categories such as home appliances, while the performance of electronics was lower, mainly in televisions and computers.
The company attributes this to the fact that there was less demand than last year and during 202nd, due to the fact that in those years the demand for the category increased due to online classes and remote work. In addition, they are experiencing delivery delays and inventory shortages due to supply chain brakes.
Clothing sales were also affected by the change in the dates of Holy Week, especially in self-service formats. At Sam’s Club, where the catalog is focused on basic clothing, all subdivisions such as men’s, women’s and children’s, performed better.
The omnichannel strategy
The company enabled the service in 70 additional warehouses and began operations for the first time in a Mi Bodega. With this, they already offer on demand in almost 300 wineries and are providing a low-cost omnichannel solution for customers who value price.
The Despensa a tu casa program grew almost 300% versus last year, while they began to leverage the 250 Walmart Supercenter and Walmart Express stores enabled with a crowdsourcing model to offer deliveries in 60 minutes.
On the other hand, orders from Walmart Pass users represented 30% of sales on demand, where Walmart and Walmart Express, and their purchase frequency is almost twice as high as that of non-users.
The number of sales in the marketplace increased by almost 30% compared to the same period last year, and they added new virtual stores such as Samsung, Baby Creysi, Black & Decker and Super Gamer. Currently, the company has more than 135 virtual stores of different brands.
The e-commerce business continues to grow strongly. In the first quarter of the year, e-commerce net sales grew 19%. Likewise, e-commerce represented 4.6% of Mexico’s sales and contributed 0.8% to total sales growth.
During the quarter, the company enabled Cashi as a payment method on its websites. Progress was also made in the online credit marketplace that they are building through Cashi, with the help of a third party. Now Walmart offers credit in more than 100 stores and the promise is that in less than 15 minutes the funds are dispersed in Cashi.
Other contact points
More than 940,000 users joined Bait, which represents a growth of 40% against the same period of the previous year. Currently, 3.3 million users are enjoying this mobile service that, according to Walmart, is three times cheaper compared to other competitors.
And through Walmart Connect, advertisers can meaningfully connect with customers by leveraging data, which allowed the company to increase the number of campaigns they run by 36%, versus the first quarter of last year. During the quarter, investment per campaign grew almost 60%.
On the other hand, putting the customer at the center is key to Walmart’s strategy. They are implementing a tool for online surveys in more than 1,200 stores, in order to obtain more feedback from customers, as well as a much more assertive measurement.
The blow of inflation
However, it was not all news for Walmart. After eight years of growing above the self-service market and clubs measured by Antad, in this first quarter of the year the market grew faster than Walmart. The high levels of inflation impacted its clients, especially the most price-sensitive ones.
In this scenario, the retailer is working hand in hand with its suppliers to strengthen its price positioning. The goal is to reduce the impact of inflation on customers’ pockets.
“This may impact our growth versus the market in the very short term, but over time it will reinforce the trust that customers have in us and translate into better results for the company. We are already seeing this effect at Bodega and Sam’s Club and we expect the same to happen at Walmart and Walmart Express,” the retailer says in the document.
In Central America, the strategy continues to be bi-format, that is, the company seeks to reinforce the Warehouse and Discount formats, and for this the retailer is focusing on basic items, through aggressive opening price points and increasing the price differential against competitors. The bet is on own brands, which grew twice as much as the rest of the business and their participation grew 140 basis points.
Adverse factors such as inflation and supply chain instructions are also present in Central American countries, creating risks in availability and affecting the purchasing power of consumers.
All in all, during the 2022 quarter, Walmart opened 11 stores, nine in Mexico and two in Central America. During the last 12 months, the company opened 118 stores and added almost 120,000 m² to its sales floor, which means a 2% increase in its installed capacity.
