Government stimulus spurred spending and retail giant benefited from rivals' closures 


By Sarah Nassauer

Walmart Inc.'s quarterly sales surged as the retail behemoth continued to use its scale, e-commerce supply chain and grocery business to attract shoppers buying food and household goods during the coronavirus pandemic.

The company's e-commerce business nearly doubled, with revenue jumping 97% from a year ago, boosted by people ordering groceries online to pick up in store parking lots. Walmart expanded the availability of delivery and pickup time slots about 30% since February in response to the health crisis, said Walmart Chief Financial Officer Brett Biggs on a call to discuss earnings.

Comparable U.S. sales, those at stores or digital channels operating for at least 12 months, rose 9.3% in the quarter ended July 31. It marks the second consecutive quarter of strong growth and evidence that the world's largest retailer is grabbing market share in some categories as many retailers close stores or declare bankruptcy amid coronavirus struggles.

In the April quarter, Walmart's comparable U.S. sales grew 10% and Wall Street was expecting growth of 5.9% for the July quarter, according to estimates compiled by FactSet.

"Our customers were spending so much more time at home that we experienced strong sales in categories like TVs, computing and connected home," CEO Doug McMillon said on a conference call. With many restaurants facing restrictions, "families continue to prepare more meals at home, and our business has benefited from that trend."

Mr. McMillon said sales were hampered by out-of-stock items, and there continues to be elevated demand for cleaning supplies and paper goods. At times, he said, Walmart saw customers return to stockpiling such items in virus hot spots. He said sales gains slowed in July as government stimulus payments waned.

U.S. traffic fell 14% in the July quarter, while the average amount spent per transaction jumped 27%. In the U.S., "customers continued to consolidate store shopping trips," spending more per trip, the company said in a release, "and shifted more purchases to e-commerce."

Walmart said sales were boosted by government stimulus spending, which lifted demand for general merchandise such as electronics, patio furniture, sporting goods and even apparel, a category with weak sales at the start of the pandemic. As the government funds tapered off, sales started to return to more normal levels in the month of July, the company said.

Overall, Walmart reported its global revenue rose 5.6% to $137.7 billion, with gains in most of the countries where it operates. The company spent $1.5 billion on Covid-related global expenses, mostly on workers, but still increased profits. Operating profits rose 8.5% to $6.1 billion.

Net income was $6.48 billion, compared with $3.61 billion a year ago. The latest period included a large investment gain. Excluding gains and one-time charges, Walmart said it had adjusted earnings of $1.56 cents a share. On that basis, analysts were expecting $1.25 a share, according to FactSet.

Also on Tuesday, Home Depot Inc. said comparable sales rose a record 25% in the quarter ended Aug. 2, as more people spend more time at home, sprucing up the house with remodeling and decorating projects. Comparable sales growth remained strong in the first two weeks of August, after the quarter ended, Home Depot executives said.

"When customers have more money in their pocket, there's some benefit to that. So we don't kid ourselves to think that that didn't have some kind of impact," Home Depot CEO Craig Menear said when asked about the impact of stimulus spending. Mr. Menear added that the pandemic made it difficult to forecast how long heightened demand would persist.

Many already- weakened retailers have buckled under the pressure of the pandemic. Several department stores and specialty retailers have filed for bankruptcy protection with plans to close many stores, including Lord & Taylor, J.C. Penney Co. and Stage Stores Inc. Last week, off-price chain Stein Mart Inc. filed for chapter 11 with plans to close most of its roughly 280 stores.

Kohl's Corp. reported that total revenue fell 23% to $3.4 billion for the quarter ended Aug. 1. Kohl's CEO Michelle Gass said sales rebounded in June, but tapered off again in July as the coronavirus surged in parts of the country.

"Consumer behavior has been profoundly altered given safety and spending concerns, and we don't expect this to change in the near term," she said.

The retailer plans to add more athletic and casual clothes such as the Lands' End and Toms Shoes brands, as well as boost its home offerings to better align with what shoppers want to buy. Ms. Gass said store closings by competitors are presenting Kohl's with an opportunity to pick up new customers.

Along with Amazon.com Inc., Walmart, Home Depot and other large retailers have been coronavirus winners. They have significant online businesses or have largely stayed open, have been deemed essential retailers by local governments and sell goods that align with quickly shifting buying habits. Shoppers are spending more on cooking at home, fixing up homes and family entertainment, while spending less on restaurants, travel and office-ready fashion.

Target Corp. and home improvement retailer Lowe's Cos. report quarterly results Wednesday.

As retailers approach the busy holiday season, the economic outlook is unclear. Supplemental unemployment benefits ended last month for tens of millions of Americans and are set to restart at reduced levels.

In the most recent quarter, "we saw stronger-than-expected sales due in large part to stock-up buying and stimulus spending," said Mr. Biggs, Walmart's CFO. "But the duration and extent of future government stimulus remains uncertain."

Walmart's business model aligns well with many coronavirus-related forces. Already the country's biggest seller of groceries, Walmart has invested heavily to offer curbside pickup or home delivery from hundreds of more stores. Those services had all-time-high sales volumes in the quarter, the company said. The retailer, which touts low prices, typically grows sales when the economy falters, according to analysts. And Walmart sells everything from lettuce to underwear and vacuums, making it a convenient one-stop shop for shoppers limiting their time in public spaces for health reasons.

Early in the pandemic Walmart struggled to keep shelves stocked as shoppers panic bought toilet paper, cleaning supplies and food. Over a hundred thousand workers were on coronavirus related leave in April. The retailer rushed to quickly hire enough staff to keep up. Inventory strain has stabilized somewhat, but Walmart is still facing higher than normal out-of-stock product rates, it said Tuesday. U.S. inventory levels were 4.6% below year ago levels.

--Suzanne Kapner and Matt Grossman contributed to this article.

Write to Sarah Nassauer at sarah.nassauer@wsj.com