Walmart Inc’s margins and online sales expected to benefit in Q2

Walmart Inc’s margins and online sales are expected to benefit in the Q2 as the largest retailer in USA cashed in on shoppers using government stimulus checks to buy higher-priced products like sneakers and toys along with daily needs.

The most of stimulus money went to housing, savings and grocery bills, as stated by an IRI consumer survey. Retailers including Walmart also experienced a flow in sales of products such as electronics and clothes in Q2. Those bigger-ticket items are expected to assist the margins of Walmart.

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“Unlike other retailers, we believe Walmart took most of the pain in Q1, limiting the Q2 impact,” Credit Suisse analyst Seth Sigman said in a note last week. One question is how well it will perform compared to big-box competitors like Costco Wholesale Corp and Target that have obtained momentum since the beginning of the pandemic.

Visits to Costco the weeks of July 6th, July 20th, and July 27th all show year-over-year growth, according to Placer.ai, a firm that tracks foot traffic.

Dollar General also saw foot traffic increase the same week unemployment benefits largely expired, on July 31, as stated by Placer.ai.

Even so, investors give Walmart the edge.

“The way we see consumers right now is they’re spending on what they need to spend on – a lot less dining, a lot more eating at home. All of those trends favor Walmart,” said Randy Hare, portfolio manager at Huntington Private Bank.

Hare highlighted Walmart’s investments in areas such as grocery pickup and same-day delivery that helped meet surging demand seen during the lockdowns.

The company is due to report earnings tomorrow. Analysts expect same-store sales growth of 5.02%, as stated by IBES data from Refinitiv.

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