Walmart reported a 95% increase in its U.S. advertising sales in the second quarter, and said its number of active advertisers rose more than 175%, as more companies and brands paid to advertise their products to its customers, online and in stores.
The advertising boom was just one of the factors that gave Walmart’s earnings call a familiar ring to anyone who’s tuned into Amazon’s business.
“The phrase ‘serving customers’ has traditionally meant one thing at Walmart,” said Walmart CEO Doug McMillon on the earnings call, referring to traditional retail sales. “But today It includes serving marketplace sellers, our advertising partners, and those that want to use our fulfillment services or proprietary software.”
Walmart’s actual ad sales numbers weren’t large enough to require disclosure in its earnings report Tuesday, but Amazon has shown the value of this approach.
Reporting its own second quarter earnings, Amazon said its “Other” category, which primarily consists of advertising, generated $7.9 billion in sales. That was up 87% from the prior year. It’s part of a larger trend of Amazon making more money doing things other than selling products.
UBS analyst Michael Lasser pressed Walmart executives on the call to reveal more about the scale and potential of their ad business, without much success.
Lasser estimated that advertising sales in e-commerce represent about 5% to 10% of GMV, the gross merchandise value of products sold. He surmised that Walmart’s ad business might be in a nascent phase, perhaps 1% to 2% of GMV, and asked if ad dollars are coming at the expense of other revenue from Walmart’s vendors.
Brett Biggs, Walmart chief financial officer, didn’t confirm or deny Lasser’s speculation but spoke to the larger direction of Walmart’s advertising business.
“We rebranded the business from Walmart Media Group to Walmart Connect last year, and that was just to make sure that it was very clear that this opportunity is going to help us connect buyers, sellers, suppliers and customers all together in a way that’s accretive to the customer experience,” Biggs said. “And as long as we do that, I will remain very, very bullish on the growth potential in this business.”
Overall, Walmart reported total quarterly revenue of $141 billion, up 2%, with profits of $4.3 billion for the second quarter of its 2022 fiscal year, ended June 30, 2021.
For the quarter, Walmart’s e-commerce sales growth in the U.S. dropped back into the single-digits as more customers returned to physical retail stores.
Its U.S. e-commerce business grew 6% in the second quarter, to about $11 billion. That compared to year-over-year growth of more than 90% a year ago, at the height of the pandemic.
But looking at the long-term trends, Walmart was able to maintain much of the e-commerce headway that it made during the past year.
Its U.S. e-commerce sales are up 103% compared to two years ago. E-commerce now represents more than 11% of the company’s $98.2 billion in U.S. net sales, vs. 6% of its $85 billion in U.S. net sales for the same quarter two years ago.
McMillon said Walmart wants to reach a point where it’s “completely indifferent” as to where and how customers shop, in terms of its revenue and profits.
“I think some people view stores these days as boring,” McMillon said. “We don’t.”
