Walmart beats expectations in Q2 as retail media continues to boom

The retailer had strong sales in Canada, as well as major growth in its ad business.

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Walmart is reporting Q2 net sales growth of 5.7%, helped by some of its largest markets, including Canada, China and Mexico.

The retailer’s net income for the quarter rose to $5.15 billion, compared with $4.28 billion a year earlier. The company delivered “strong” top-line growth globally, partially driven by inflation. Total revenue was $152.9 billion.

Walmart is reporting “strong sales in food and consumables” in Canada. It up 10% over the most recent reporting period, and 32% over two years. However, the company is also reporting higher transportation costs in Canada, as well as a 9% slip in ecommerce net sales as the overall market contracted and higher sales pushed higher in lower-margin food and consumables.

In Tuesday’s earnings call, Walmart president and CEO Doug McMillon says Americans, Mexicans and Canadians are prioritizing how they spend their money in response to strong inflationary pressures, and that the company is adjusting to the reality of inflation.

McMillon says markdowns are weighing on margins, and that apparel was particularly affected. It’s reducing shipping containers by more than half from Q1 levels, closer to historical averages, to improve margins.

According to McMillon, it’s becoming more digital as a relevant omnichannel retailer and seeing more middle and high income shoppers choose the retailer. Walmart is also expecting a strong finish to the back to school season.

The retail juggernaut is also reporting that its global advertising business grew nearly 30% year-over-year, led by a combination of the Walmart Connect retail media offering and Flipkart advertising. Walmart Connect is delivering more value to sellers, McMillon says. The retailer is also improving search and first party shopper data, allowing for improvements to advertisers. Advertising alone is up 121% compared with last year.

“Advertising is a global priority for us,” McMillon says.