Company leadership spoke on Walmart’s (WMT) earnings call Thursday after the retail giant delivered a substantial earnings beat for the first quarter of fiscal 2025.
The executives talked about Walmart’s strategy of offering lower prices and more convenient shopping options, and its increasing market share among higher-income shoppers with prices remaining elevated in other areas of the economy.
Walmart Wants to ‘Lead on Price’ as Consumers Suffer From ‘Stretched’ Budgets
Historically, Walmart Chief Executive Officer (CEO) Doug McMillon said, the retailer has prioritized delivering value to customers, and plans to continue to “lead on price” as many retailers have been criticized for keeping prices higher than necessary to pad profits.
“We’ve been known for price forever but we’re increasingly known for convenience, so whether the environment is inflationary or deflationary, whether customers have more money or less money, if we’re doing a good job on the items and prices and the service we provide, saving them money with pickup and delivery, for example, we can continue to grow share,” McMillon said.
The executives noted that many consumers are still suffering with “stretched” wallets, and many of the “value-seeking behaviors” Walmart has seen over the past year are continuing, with many customers keeping focus on essential purchases and moving away from discretionary spending.
Combination of Value and Convenience Driving Sales Among High-Income Shoppers
The retailer said it divides the customer base in annual income tiers, from under $50,000, between $50,000 and $100,000, and above $100,000, with their customer base typically one-third of each category.
But as prices and interest rates have remained elevated across other areas of the economy, executives said they have seen their market share of high-income shoppers increase in recent quarters. Chief Financial Officer (CFO) John David Rainey said upper-income households accounted for “the majority of share gains” in the quarter.
“We’re not trying to chase higher-income cohort sales, we just offer value. If you look at what’s happened historically, people with higher incomes have shopped Walmart, they’ve just been selective in the categories that they buy and the items that they buy,” McMillon said, noting that if Walmart offers “the right items at the right prices,” customers will respond.
E-Commerce, Advertising, Subscriptions, and AI Among Revenue-Driving Developments
Walmart said it has a number of growing businesses aside from its physical stores, including an e-commerce unit that Rainey said is “on par with any e-commerce player in the world” in terms of shipping volume.
The company also has growing advertising and membership businesses, which could continue to increase as Walmart agreed to acquire TV maker Vizio earlier this year, along with its Walmart+ subscription that offers benefits like same-day delivery as it works to compete with companies like Amazon (AMZN) and Target (TGT) for e-commerce market share.
The executives also noted artificial intelligence (AI) as a growth area, including a partially completed rollout of AI technology that allows Sam’s Club customers to walk out of the store without getting their receipt checked at the door, a common practice at warehouse retailers like Sam’s, Costco, and BJ’s Wholesale.
Focus on ROI as Walmart Health Clinics Close
Referring to its decision last month to shutter its Walmart Health Clinics, Walmart leadership said the decision was made as the company focuses on return on investment (ROI).
Rising costs associated with the clinics meant that Walmart “could no longer see a path to achieving an acceptable level of profitability,” McMillon said.
Walmart will remain disciplined in monitoring costs, Rainey said, as it works to focus on using its capital in ways that create “clear drivers of incremental value.”
Walmart shares rose 6.4% to $63.68 as of 1:39 p.m. ET Thursday and are up about 21% so far this year.