The last few months have been good ones for Walmart, helping cement its position as the US’s largest retailer, with its share price already at record highs, today’s latest numbers are set to be a key test as to whether all of the good news is already priced in, or whether the second half of the year will see much lower sales as spending patterns settle down, and other shops re-open.

Early indications suggest we might see further gains when US markets open later, but it’s hard to see how Walmart will be able to match its first half performance, at a time when the US economy appears to be slowing down, and unemployment levels may well start to increase again.

When Walmart reported in Q1 the company reported a 74% rise in e-commerce sales, as more people shopped on-line as a result of the Covid-19 lockdowns. While its sales soared during the pandemic, so did its costs as the company employed an extra 200k people to help clean stores, stack shelves and get online orders out of the door.

If those numbers were impressive then today’s Q2 numbers appear even more so, as once again, America’s largest retailer crushed expectations.

Total revenues in Q2 increased $7.4bn to $137.7bn driven by a 97% rise in ecommerce sales This outperformance was matched by a 9.3% rise in comparable sales which was largely driven by food and general merchandise, as US consumers spent their fiscal stimulus and bonus payments cheques.

While all of these headlines look very impressive, it should also be remembered that Walmart was one of the few companies that was allowed to stay open, when many smaller retailers had to close.

The increase in sales volumes did come with a downside coming as it did with a significant increase in costs, as the company spent $1.5bn extra on safeguarding measures and extra staff.

Its international sales were a bit of a letdown, declining 6.8% to $27.2bn due to adverse currency effects, and the temporary shutdown of the Flipkart business in India for part of the quarter, as well as its operations in Central America and Africa.  

As we head into Q3 consumer spending should start to level off from the elevated levels seen in Q1 and Q2 as lockdown measures taper off, and other stores reopen and the stimulus money tapers off.

This uncertainty over the outlook kept the company from offering fresh guidance, with the prospect of further government stimulus also a key unknown.

For those looking for detail in respect of its UK operation Asda there was no additional detail to the speculation at the end of July that the company was looking to reopen its options with respect to a possible sale of the business.  

Of the big four supermarkets Asda saw its market share slip back to 14.3%, a fall of 0.6% in the latest Kantar numbers, as supermarket sales slowed as lockdown measures continued to get eased throughout July, as restaurants and cafes reopen their doors.

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