The news: Despite warning last month of inflation’s hit to profits, Walmart’s revenues beat analysts’ expectations in Q2 as its low grocery prices wooed a wider array of shoppers.
Everyday low prices: With grocery costs taking over consumers’ budgets, shoppers are gravitating toward retailers like Walmart that offer the most value.
Inventory pressures: While Walmart said it made progress selling excess inventory in Q2, the retailer is still saddled with surplus apparel, electronics, and home goods as shoppers continue to pull back on discretionary spending.
The flywheel effect: Walmart is relying on revenues from its subscription business, as well as its retail media network Walmart Connect and GoLocal delivery service, to help offset reduced margins on sales of physical goods.
The big takeaway: Now that it has a handle on its inventory problem, Walmart is better equipped to weather inflationary challenges than most retailers. Its ability to negotiate better prices with suppliers and absorb more price increases enables the business to keep customers loyal, even amid strong competition from discount retailers.
While growing its non-retail businesses will help Walmart better compete with Amazon, the retailer shouldn’t lose sight of its advantages—namely, its dominance in grocery.
Dive deeper: See what our forecasting and retail & ecommerce analysts had to say about the earnings.
This article originally appeared in Insider Intelligence's Retail & Ecommerce Briefing—a daily recap of top stories reshaping the retail industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.
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