The news: Walmart’s US ecommerce sales grew 24% in the quarter ended July 31, and for the first time the business ran at double-digit incremental margins for a full half. That means every new dollar of online sales brought in more than 10 cents of operating profit.
Online sales now make up more than 23% of Walmart's US business, double their share five years ago.
But US comparable sales grew just 2.6%, the weakest in six years, according to the AP, and sales inside the stores fell.
Delivery made up the difference: sales from orders shipped out of stores rose more than 40% in the quarter.
And for the first time, Walmart said how much of its network runs through those stores. They shipped 80% of its US online orders and 100% of its fast deliveries.
What changed: Walmart stopped describing stores and ecommerce as separate businesses.
“We had a store channel, we had an eComm channel, they were independent, they were vertical,” CEO John Furner told analysts. Now, he said, “think of us in terms of the top line, the bottom line, we'll manage the middle.”
That blended middle is where the profit came from: advertising and membership income, delivery routes with more stops on them, and fast-delivery fees all pushed ecommerce margins higher. Paid fast deliveries reached a record 37% of orders shipped from stores.
The result, CFO John David Rainey said, is that Walmart is “becoming increasingly agnostic about channel dynamics.” That means it no longer cares much whether a sale happens in an aisle or on the app.
None of it replaces Walmart’s warehouse automation either; the warehouses sit one step upstream. Automated distribution centers now feed 3,100 of Walmart's 4,615 US stores, and more than half of online order volume moves through an automated building before the final leg.
By the numbers: Furner called delivery speed “an acquisition strategy”. Customers who use fast delivery shop more often and are more likely to join Walmart+.
Sub-30-minute delivery is live in 38 US markets, and the number of orders delivered that fast doubled in a year.
70% of online orders arrived same-day or better.
Fast delivery overall grew 48% in the quarter.
The pattern: Walmart is one of five large US retailers that put new volume or money behind store fulfillment in the past 12 months.
Home Depot launched three-hour delivery from more than 2,000 stores this week at a $7 flat fee, though it keeps separate warehouses for bulky pro orders.
Dollar General runs same-day delivery from about 18,000 of its 21,000 stores, and said the service added roughly 70 basis points to first-quarter comps.
Smaller companies are making the same choice: Omaha Steaks rebuilt its cold chain around 44 stores this spring and cut average delivery time from 6.2 days to 1.24.
The counter: Amazon, the biggest online retailer, runs the opposite network. Its same-day deliveries grew about 70% last year and reached roughly 100 million US customers, all from dedicated delivery buildings rather than stores.
The company is still building that way, too. In July, it filed plans for a $1 billion, 4 million-square-foot robotics fulfillment hub on Long Island.
Best Buy moved in the same direction earlier, but for a different reason. In late 2023, it said store-shipped volume had fallen to its lowest share since before the pandemic, with about 62% of small packages shipping from automated warehouses. So store staff could spend their time with customers instead of packing orders.
One number is still missing from every version of this argument: what the same order costs to ship from a store versus from a warehouse. No retailer has published that comparison, so each company's case rests on its own before-and-after numbers.
What’s next: Walmart raised its capital-spending plan for the year to about 4% of sales, from 3.5%. And Rainey said the rising depreciation behind it comes from spending on supply chain automation and delivery speed.
Walmart’s full quarterly filing, due in the coming weeks, will break out that spending in more detail, and third-quarter results follow in November.
