Walmart’s Q2 2024 results were solid both from a sales and profitability standpoint. Traffic and sales were strong, as Walmart and Sam’s Club's "everyday low-price" positioning is resonating with all households. Moreover, convenience, an improved selection of “better” and “best” merchandise, and a broadened marketplace selection is resonating with higher-income households. Visits is up for all income segments as shown in the table below. Walmart CFO John David Rainey noted that, “upper-income households continuing to account for the majority of gains even while we grow sales and share among middle- and lower-income households.”
Not included in the table is store delivery orders (which increased +50% in the quarter) and generally higher income households that pay for convenience). Rainey continued, “Customers [are] increasingly choosing and paying for delivery of their e-commerce orders in under 1 hour or under 3 hours.” The high growth is also being driven by more Walmart+ membership customers (up 10%-20%), meaning that penetration of this membership tier is increasing. In addition to added “convenience” and the brand's “save money” promise, visit gains are also being driven by the store remodeling program, adding credible “better & best” merchandise, and better execution in fresh.
Curbside, store delivery, marketplace, and Walmart.com now represents over 13% of sales, per our estimates, which would equate into a $60B business. For the quarter, revenue from these businesses increased +22%. Moreover, that $60B includes only the commission from the marketplace’s third-party sellers, not the gross merchandise value. The third-party marketplace business grew +32% in the quarter, so including that value would likely move sales the figure above $70B.
Looking at Walmart’s results over time, it’s really interesting to see the ongoing market share gains despite increased cross-shopping in the industry, which is something we've covered quite a bit this year. The table below shows favorite chains/cross visitation among Walmart in Texas and other grocery and superstore chains for the last twelve full months compared to 2019 (We are using Texas to be representative of Walmart’s success around the country).
However, competition is different from market to market, so we've attempted to show an apples-to-apples comparison below. Loyal visitors (more than 4 visits per year) are roughly flat versus 2019; however, less frequent visitors are up 7%. That increase in less frequent visitors is driving up cross-visitation to every major brand in the market.
Walmart’s gain in new shoppers contrasts with regional titan H-E-B which has increased its visitor base by 22% (on roughly the same number of locations) since 2019, with visits up 26% over the same time. In other words, H-E-B is driving masterful increases in market share. Combined with higher prices, Placer estimates that H-E-B locations have seen a 36% in sales since 2019.
By contrast, Target (through its Circle Rewards loyalty program) has only increased loyal households. As Target Texas visits are up 4%, Target is missing out in occasional customers.
Looking at Target’s trade area audience profile, it is seeing losses from more affluent households, the cohort that Walmart is making large gains. Placer’s demographic data for the region shows no changes in the Walmart store-shopper between the two periods. In other words, the increase in visitors is across all income groups, which is what management said, as noted above.
