Dive Brief:
- Walmart’s U.S. comparable-store sales excluding fuel rose 4.1% in the first quarter of fiscal year 2027, driven by strong growth in grocery and general merchandise.
- Walmart U.S.’s grocery category recorded mid-single-digit comps growth in Q1, led by fresh and pantry items.
- The company said comps were held back by recent changes in how the federal government pays for certain drugs — a challenge that has also impacted financial results for other retailers. The company’s Q1 comps took a 100-basis-point hit related to legislation tied to the Inflation Reduction Act, CFO John David Rainey said on the Thursday morning earnings call.
Dive Insight:
Walmart recorded the strongest transaction growth stateside that it’s seen in the last six quarters and also saw strong growth in e-commerce sales, President and CEO John Furner told investors.
Walmart is focused on price investments to help soothe the financial pressure that consumers continue to feel, Furner said. The retailer has extended the temporary price cuts it implemented last year and now has 7,200 reductions in place, Furner said.
He also noted the retailer recently started selling a basket of grilling essentials that feeds eight people for under $5 per person.
“This is an industry, particularly in food, where everyone is looking for value and has been for a really long time,” Furner said.
Speedy delivery is another capability that Walmart is leveraging to meet consumer demands. Walmart can reach approximately 60% of the U.S. population in 30 minutes or less. Orders delivered in under three hours accounted for roughly a third of store-fulfilled orders in Q1.
“[F]ast fuels frequency. When we see that we are able to deliver to customers in the time frames that they expect, we see a much greater engagement with our customers,” Furner said, adding that customer engagement “improves the utility of our membership programs.”
Walmart’s U.S. e-commerce operations saw 26% sales growth in Q1 — roughly the same growth rate it recorded in the prior quarter. Approximately half of Walmart’s U.S. e-commerce fulfillment center volume is automated, and more than half of the regional distribution centers are in various stages of being retrofitted, Furner noted.
Company executives reiterated the full-year guidance the company provided in February, even with the recent spikes in fuel costs.
While company executives told investors they feel confident that Walmart has diversified its operations and created a strong enough customer proposition to allow it to withstand economic strains, Rainey noted the company is “not bulletproof to some of these things that are happening in the economy.”
As the Strait of Hormuz crisis continues, Rainey told investors that if fuel prices remain high, Walmart may start to see more pressure on average unit retail prices, and that the inability of fertilizer, nitrogen and phosphates to pass through the strait could impact the food and agriculture sector.
“[Everyday low price] is core to who we are … If the current elevated cost environment persists, we'd expect somewhat higher retail price inflation in Q2 and the second half of the year,” Rainey said.
