Walmart (NASDAQ:WMT) said it is maintaining a focus on price investments, faster fulfillment and expanding digital services as it seeks to build market share, while managing continued inflation and regulatory pressure in pharmacy.
During a discussion with Goldman Sachs analyst Kate McShane, a Walmart executive said the company’s price gaps remain strong, supported by investments intended to reinforce its Every Day Low Price strategy. The retailer is working with suppliers to translate negotiated rollbacks into lower prices for customers during the second half of the year.
Health and Wellness Faces MFP Headwind
Walmart’s health and wellness business represents about 10% of its U.S. business, with pharmaceuticals accounting for the majority of that segment. The executive said Maximum Fair Pricing, or MFP, was applied to roughly 10 high-volume drugs. About eight of those drugs either became generic or extended prices beyond Medicaid to consumers more broadly, creating a top-line headwind.
That pressure is expected to continue next year after 15 additional drugs were announced for MFP treatment. Still, Walmart said its core health and wellness business remains strong, with prescription growth increasing year over year in the second quarter and profitability improving by double digits.
The retailer also highlighted the spending behavior of health and wellness customers. Customers who engage with health and wellness spend roughly three times more than the average Walmart customer, while pharmacy-delivery customers spend nearly six times more, according to the company. Walmart said it can deliver pharmaceuticals to 96% of the U.S. population within three hours or less and to 60% within 30 minutes or less.
E-Commerce Growth and Fulfillment Expansion
Walmart reported 24% e-commerce growth during the latest quarter, marking its 10th consecutive quarter of growth above 20%. The executive attributed the performance to assortment, price and customer experience, including broader Marketplace offerings, digital access to services such as pharmacy and vision, and faster delivery.
About 70% of Walmart’s deliveries to homes are now delivered the same day or faster, the company said. It also reported a doubling in deliveries completed within 30 minutes or less from the prior year. Approximately 80% of e-commerce deliveries flow through stores, while nearly 40% of all deliveries from stores are now delivered in hours or minutes.
The company described its fulfillment-network buildout as being in the “top of the fourth inning.” Walmart is investing in advanced robotics, modernized software and supply-chain capabilities intended to improve inventory positioning and make more products available for two-day, next-day, same-day and faster delivery.
Walmart said its e-commerce operation has now recorded six consecutive quarters of profitability, with the latest quarter representing its most profitable e-commerce quarter to date. Marketplace, advertising and membership businesses have supported that progress, although the executive said e-commerce was profitable in the second quarter even excluding advertising.
AI Shopping, Marketplace and Advertising
Walmart said engagement with its AI shopping assistant, Sparky, is increasing. The assistant can support checkout, customer service, recipes and visual shopping, according to the company. Walmart said visual shopping has produced a 57% higher conversion rate than text-based shopping, while weekly engagement with Sparky increased more than 60% quarter over quarter. Customers using Sparky have generated average order values that are 40% higher, the executive said.
The retailer also said it is seeing high conversion rates from customers referred by OpenAI and Google’s Gemini, adding that many of those shoppers are new or returning customers with high organic repeat rates.
Walmart Marketplace grew 52% in the quarter, with general merchandise accounting for the bulk of that growth. The company cited Nespresso and beauty brand Medicube as examples of brands attracting customers who are new to certain Walmart categories. Walmart Fulfillment Services handles about 50% of Marketplace volume and is offered at roughly a 15% discount to competing market pricing, the executive said.
Walmart Connect advertising revenue increased more than 40% in the quarter and carries margins of roughly 70%, according to the company. Walmart also said unit growth for Vizio and Vizio-powered onn televisions exceeded 150% year over year. The retailer is testing digital signs in stores and expects to operate in more than 200 stores by year-end.
Holiday Focus Remains on Value and Convenience
Walmart said back-to-school performance has been strong, supported by value-focused items including a 24-pack of Pen+Gear crayons for 24 cents and wide-rule paper for 82 cents. The company said it sells more than 50% of U.S. back-to-school unit volume.
Looking ahead to holiday shopping, the executive said Walmart’s merchants are prepared with new items and “sharp price points.” The company plans to emphasize both low prices and convenience, arguing that customers increasingly define value as saving both money and time.
“There is a great opportunity right now to go after market share,” the executive said. “We are playing offense.”
About Walmart (NASDAQ:WMT)
Walmart Inc is a multinational retail and technology company that operates supercenters, discount stores, neighborhood markets, e-commerce platforms and membership warehouse clubs. Its merchandise includes groceries, apparel, electronics, home goods, health and beauty products, general merchandise and other consumer products.
Founded by Sam Walton in 1962 and incorporated in 1969, Walmart is headquartered in Bentonville, Arkansas. The company serves customers through operations in the United States and international markets, including Mexico, Canada, China, India and several countries in Central America and Africa.
