Strong growth in expectations is expected, as Walmart is ‘different from other retailers’

By Aishwarya Venugopal and Melissa Fares

(Reuters) – Walmart Inc’s Margins and online sales are expected to benefit in the second quarter, as the largest U.S. retailer shopped at shoppers with government incentive schemes to buy higher-priced products such as sneakers and toys along with daily essentials.

The majority of stimulus money went to housing, savings and groceries, according to a consumer survey by IRI. Retailers including Walmart also experienced an increase in sales of items such as electronics and clothing in the second quarter. Of these items with larger tickets, Walmart’s margins are expected to help.

“Unlike other retailers, we believe Walmart took most of the pain in Q1, limiting its impact on Q2,” Credit Suisse analyst Seth Sigman said in a note last week. One question is how well it will perform compared to competitors with big boxes like Costco Wholesale Corp. and Purpose which have gained momentum since the beginning of the pandemic.

Visits to Costco in the weeks of July 6, July 20 and July 27 all show year-over-year growth, according to Placer.ai, a company that tracks foot traffic.

Dollar General also saw foot traffic increase the same week increasing unemployment benefits for the most part, on July 31, according to Placer.ai.

Even so, investors are giving Walmart the lead.

“The way we see consumers now is that they spend on what they need to spend on – a lot less food, a lot more to eat at home. All of those trends favor Walmart,” said Randy Hare, portfolio manager at Huntington Private Bank.

Hare highlighted Walmart’s investments in areas such as supermarket pick-up and same-day delivery that helped meet growing demand seen at the lockdowns.

“Walmart has done a lot of good in recent years. It’s improved performance & successfully changed the story of its story from that of a mature brick-and-mortar store to a viable No. 2 in e-commerce,” said UBS stock analyst Michael Lasser.

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For an interactive chart: (https://graphics.reuters.com/WALMART-RESULTS/PREVIEW/gjnvwxndwpw/index.html)

The company is due to reach revenue on Tuesday. Analysts expect same-store growth of 5.02%, according to IBES data from Refinitiv.

(Report by Aishwarya Venugopal in Bengaluru and Melissa Fares in New York; edited by Anna Driver and Nick Zieminski)