Walmart CFO discusses premium memberships, price reductions

by Kim Souza ([email protected]) 78 views 

Walmart Chief Financial Officer John David Rainey said Wednesday (June 12) that about 20% of operating income generated in the the most recent fiscal quarter came from Walmart+ and Walmart Connect – the retailer’s in-house advertising business.

“What’s great about Walmart Plus is the behaviors that we see of those customers. Notably, they spend about twice as much as an average customer. So, we want more and more of our customers to use us in that way. They also, maybe this is intuitive, but they tend to shop more frequently and also have smaller baskets. They are using us for those one or two items also sometimes that maybe they historically would have thought about using another retailer that for. And so, as we continue to improve our offering there, getting better at providing the merchandise assortment, the offering the customers want and improving our ability to deliver that to them when they expect it, we’re continuing to see growth there,” Rainey said at the Evercore ISI Consumer Conference.

Evercore’s survey indicates about 15 million U.S. consumers are now Walmart+ members. Rainey did not confirm or deny that number, but said the membership program success is not going to be determined by how many memberships are sold. The retailer continues to be elusive with details about the program. The Walmart+ membership costs $98 per year or $12.95 monthly InHome delivery can be added for $7 per month.

Walmart said last week that online delivery is growing faster than curbside pickup as the number of Walmart+ members grow. Free delivery is a benefit with the subscription. Rainey said the U.S. e-commerce business is a few years away from profitability, but Sam’s Clubs e-commerce is already profitable.

Walmart also is reducing prices on more items. The company said it has 7,000 price rollbacks, up 45% over a year ago.

“I think this is going to be a topic of conversation probably every quarter that we have. And it’s dynamic. It’s moving. There are certainly pockets where we think that it’s prudent to invest more in those price gaps. There’s other areas where we feel like we’re very comfortable,” Rainey said.

He said rollbacks are typically paid by vendors, but Walmart has taken the hit on more of them in the past two quarters. Rainey said lower prices fuel higher unit sales and that is priority for Walmart U.S. this year as inflation begins to decline.