All eyes on Walmart + when retailer announces first quarter results on Tuesday – fr

All eyes on Walmart + when retailer announces first quarter results on Tuesday – fr

From now on, for Walmart, it’s all about customer loyalty and loyalty.
One of the tools it will use to do this is Walmart +, a subscription service the company launched in September.

Walmart is expected to present a progress report on the program when it reports its earnings on Tuesday. So far, the retailer has not shared the number of subscribers – and that is unlikely to change this week – but investors and analysts will be listening for clues as to whether the program is helping the retailer deepen relationships. with its buyers and to sell them other types of services. Holding on to market share and driving to the store has grown in importance, especially as consumers get vaccinated and feel free to revert to more typical spending habits before. the pandemic.

Walmart + is part of the retailer’s plans to expand its business beyond retail and use its reach to make money in other ways, from advertising and financial services to healthcare. When customers sign up for the program, the retailer can learn more about their shopping list and preferences – which they can then turn into customer benefits such as personalized coupons and new revenue streams such as advertisements. targeted.

“This is another tool Walmart has to build loyalty and drive growth online,” said Michael Lasser, retail analyst at UBS. “And above all, it allows him [the company] to capture more data from its consumers. ”

Growing competition, declining stock

Walmart, the nation’s largest grocer, has seen sales increase throughout the pandemic, especially online, as Americans cut back on shopping and focused on food and other essentials related to the pandemic. pandemic, from soap to puzzles. Its same-store sales increased 8.6% and its e-commerce sales in the United States climbed 79% in the last fiscal year, compared to the previous year. Yet despite its size, the discounter faces many competitive threats from e-commerce forces like Amazon, low-cost retailers like Dollar General and Aldi, and third-party disruptors like Instacart and Fresh Direct.
In a recent corporate memo, obtained by Recode, Walmart was candid about the challenges it faces, from grocery shoppers choosing competitors like Target, Publix and Albertsons to how to retain members who sign up to. Walmart + when their subscriptions expire.

Walmart hit a 52-week high of $ 153.66 on December 1. Since then, the shares have fallen to around $ 139. Walmart’s fourth-quarter profits sparked a sell-off, with company executives saying the retailer would increase its investment level to $ 14 billion and expect sales to decline for the year. Its shares have fallen more than 3% so far this year, bringing its market value to around $ 391 billion.

Walmart’s sales growth is expected to decline in the first quarter, as pandemic-related spending wears off. UBS expects the retailer’s U.S. same-store sales to increase 1.5% in the first quarter. This is lower than the 10% growth Walmart recorded in the first quarter a year ago, but higher than the average 3.6% same-store sales decline that UBS expects for consumables retailers.

The company’s earnings per share are expected to be $ 1.21 and revenue of $ 132.09 billion, according to consensus estimates from Refinitiv.

Walmart did not share a specific forecast for the year, but said it expects net sales to increase to a lower figure and operating profit and earnings per share to be flat or in decline. slight increase excluding the impact of divestments.

Walmart + is Walmart’s answer to Amazon Prime, but with its own benefits and a value-driven rotation. The subscription service costs $ 98 for a year or $ 12.95 for a month. It includes features like fuel discounts, free next day and two day delivery, and unlimited deliveries of groceries and other merchandise to Walmart stores.

Still in its infancy

Walmart + has grown to around 8-9 million members, according to a recent survey by Consumer Intelligence Research Partners. That goes from around 7.4 million to 8.2 million members at the start of the year. Members spend an average of $ 1,100 per year on the Walmart website, according to research.
Since launching the subscription service in the fall, Walmart has continued to tweak it. For example, the company dropped a minimum online shipping of $ 35 for members in December. The move brought the retailer closer to Amazon Prime and took place during the holiday shopping season.

At an Investor Day in February, Walmart CEO Doug McMillon said Walmart + would be one of the ways the company would increase sales for new and existing customers. First, however, he said the company will focus on “a high quality experience” for customers before adding more benefits and focusing on member growth.

“We don’t want to get ahead of ourselves and sell too many Walmart + subscriptions and have a customer experience below our expectations or their expectations,” he said at the virtual event.

For example, he said, the retailer needs more capacity to track grocery and other store orders delivered to members’ homes – one of the main benefits of the program. The company is adding automated systems to dozens of stores to quickly select items and process more orders online.

“Over time, more and more of our customers will want Walmart + because it makes life better,” he said. “This relationship will drive repeat business and provide data that will allow us to serve them even better and be more personalized. It is an important part of our strategy. “

UBS’s Lasser said the membership program could ultimately strengthen other parts of Walmart’s business – such as allowing it to serve more targeted and relevant ads based on consumers’ buying habits.

Earlier this year, Walmart renamed its advertising business and announced its ambitions to become one of the top 10 advertising platforms in the United States over the next several years. Its advertising activity represents less than 1% of its annual turnover, according to its 2020 annual report.

UBS has valued Walmart shares as a buy. Its price target for Walmart is $ 160, about 13% higher than where the shares are trading.

As the retailer faces tough comparisons a year ago, Lasser said customers are likely buying more merchandise such as televisions, lawn equipment and clothing than basic home and business products. groceries like paper towels and milk. It could mean more profitable sales for Walmart, he said.

Moody’s retail analyst Charlie O’Shea has said he will listen to the speed of online sales and whether sales of discretionary items have picked up. He said he didn’t expect the company to reveal Walmart + subscriber numbers, but expected to know the rest of the program.

He said Walmart + was still in its infancy compared to Amazon Prime, which launched in 2005. Prime has grown to around 200 million Prime subscribers around the world, its CEO Jeff Bezos said in April.

Even though Walmart shared subscriber numbers, O’Shea said the pandemic has skewed shopping habits and made “a difficult time to evaluate a membership program.”

“It’s a lab experiment that should work,” he said. “But I don’t know if it will go up to the level of Amazon. “


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