Dominick Reuter/Business Insider
- Walmart keeps posting strong earnings, driven in part by gains among higher-income shoppers.
- The retailer is investing in new stores, growing product selection, and e-commerce convenience.
- Bit by bit, Walmart is looking more like Target, and that should terrify the smaller rival.
Walmart hit the bull's-eye with its first-quarter earnings.
The Bentonville retailer on Thursday reported a solid 6% year-over-year improvement in first-quarter sales, with profits growing even faster.
The lift was driven in part by continued traction among shoppers who earn more than $100,000 per year.
Although CEO Doug McMillon says the company is "not trying to chase higher-income cohort sales," it has nevertheless made considerable investments in key areas that are likely to retain wealthier, inflation-weary shoppers who came in looking for low prices.
Most visibly, Walmart is plowing cash into renovating its store fleet and building new locations, on track to overhaul 900 locations this year. The so-called "store of the future" design features brighter lighting, better signage, and a generally more inviting space to wander the aisles.
Walmart is also expanding its product selection in stores — most notably with the recent launch of its premium private label brand Bettergoods — and online as the number of third-party marketplace sellers grew by more than a third in the US, and product listings now top 420 million items.
Both of those things work together to increase the convenience of e-commerce, which continues to see significant sales growth in delivery and curbside orders.
"We've been known for price forever but we're increasingly known for convenience," McMillon told analysts Thursday. "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."
This combination — nicer stores, upscale merchandise, and ultra-convenient pick-up and delivery — is making Walmart look increasingly like Target, and that's something that should worry its C-Suite in Minneapolis.
Target doesn't report earnings until next week, but if the past year is any indication, the Bullseye is having less success emulating Walmart than Walmart is having emulating Target.
Sales have been notably softer for Target, with the company projecting a 3% to 5% decline this quarter, and the brand continues to take a beating over its handling of its annual Pride celebration.
The company did introduce a new private label — the budget-minded Dealworthy brand — and it rolled out a paid membership that seems modeled off of Walmart+, but neither has received particularly glowing reviews.
Walmart meanwhile continues to be very effective at being Walmart, and it's getting better at being Target too.