In a rare foray into politics, Walmart CEO Doug McMillon expressed well-wishes to President-elect Joe Biden on Tuesday, joining the roster of business leaders and groups to acknowledge the election results that President Donald Trump continues to baselessly dispute.
On a conference call to discuss Walmart’s strong third-quarter results, McMillon ended his opening remarks by saying, “Congratulations to President-elect Joe Biden.” He continued: “We look forward to working with the administration and both houses of Congress to move the country forward.”
Last week, some 24 of America’s top CEOs convened to discuss the possibility of Trump’s refusal to leave office, according to news reports. It is not known whether McMillon was on that call, but the Walmart boss is a member of the Business Roundtable, which last week released a statement acknowledging and congratulating Biden and Vice President–elect Kamala Harris in their new roles as Big Business looks to avoid the political tumult that could harm the economy’s recovery.
The Trump administration’s legal challenges in various states have largely fizzled, and no major voting irregularities have been detected. Biden won 306 Electoral College votes, more than enough to win the presidency.
Few CEOs have been as explicit as McMillon, who leads the largest company and private employer in the U.S., in congratulating Biden. Goldman Sachs CEO David Solomon was another. Because of its broad customer base, Walmart rarely wades explicitly into political discussions.
As for Walmart’s performance during the second quarter, the retailer’s U.S. Division, which generates more than 60% of the company’s revenue, again flourished as shoppers consolidated trips at fewer retailers and took advantage of Walmart’s expansive e-commerce offering and ability to have shoppers pick up orders curbside.
Comparable sales, which include business at stores open for at least 12 months and digital revenue, rose 6.4%, high by pre-pandemic standards for Walmart. E-commerce rose 78%, and McMillon noted that Walmart had “significantly” reduced losses on e-commerce. It achieved that by having more people retrieve orders at stores, which saves the company on shipping, and by selling more high-margin items.
At the same time, there were some danger signs. In-store comparable sales rose only 0.7%. The number of transactions, a proxy for shopper visits, fell 14%, but shoppers spent 24% more, suggesting that shoppers wary of COVID-19 are visiting stores less often. That could hurt Walmart in terms of impulse purchases and other spending that arises from browsing, something particularly important during the holidays.
What’s more, while the 6.4% increase bested Wall Street forecasts by nearly three percentage points, it was a marked slowdown from the previous quarter. Analysts pegged that in large part to Walmart’s larger reliance on lower-income customers dependent on government assistance this year, compared to Target’s clientele, for example. McMillon himself noted Walmart had gotten “less benefit” as millions of Americans received less financial assistance.
“Walmart is more exposed to this group than many other retailers and, as a result, saw some deterioration in spending levels,” GlobalData managing director Neil Saunders wrote in a research note. “It is no longer being boosted by uniformly higher spending across all the income groups it serves.”
Still, finance chief Brett Biggs told analysts on the call he expected Walmart to have a strong holiday quarter, with the trends that have buoyed it so far since the pandemic started persisting. “Customers are resilient,” he said. Biggs also noted Walmart had made improvements in its in-stock levels, also crucial during the holidays, when product shortages at stores would dent sales.
The company’s Sam’s Club business also prospered, with comparable sales up 11.1% as it enjoyed the same factors boosting its most direct rival, Costco Wholesale. Walmart, which also operates a big international division, said total revenue rose 5.2% to $134.71 billion, above analyst projections.