Now that’s what you’d call the Sam Walton Way. 

On Thursday, Walmart reported better-than-expected first-quarter earnings, pushing its market cap to an all-time high of more than $500 billion. Walmart handily outsells Amazon, for anyone keeping score at home. So just how, exactly, does the behemoth box store chain Walton founded in 1962 keep on finding ways to grow? 

Brick in the Walmart

Walmart sets a high standard for itself every year. The company set a sales growth target for the year at 4%, which, given its massive size, would require it to find $26 billion in new sales. For the three months ended April 30, Walmart showed it’s right on track — and then some: The retail giant posted $161 billion in revenue, marking a 6% increase, while posting a profit of $5.1 billion.

It’s the result, in part, of several strategies to diversify its business and revenue streams outside of traditional retail. In an interview with CNBC, CFO John David Rainey said new businesses contributed to one-third of operating income growth. That includes its advertising business, which grew another 24% in the first quarter of the year after generating $3.4 billion in ad sales last year. Meanwhile, the firm pointed in its earnings call to the growth of its membership subscription service Walmart+, a sort of copycat program of Amazon Prime (though it didn’t report specific figures on total subscribers or revenue).

If it all sounds like the big-box retailer is on a collision course with its one true rival, Amazon, that’s because it is. And Thursday’s earnings made the current state of the battle for retail supremacy even more clear: 

• Walmart’s e-commerce business —which exploded in popularity during the pandemic, and has steadily evolved toward an Amazon-esque platform for third-party sellers — grew another 22% in the first quarter, marking eight straight frames of double-digit growth.
• Walmart says the number of US third-party sellers grew 38% in the quarter, while Mexico saw a 50% increase (the marketplace is only available in the US, Mexico, and Canada). Meanwhile, the company said online delivery orders surpassed in-store pickup for the first time this quarter.

Closing Time: Walmart’s shares closed up nearly 7% on Thursday, and are up some 20% in 2024. But the retail titan didn’t get through this week without hitting a few speed bumps. On Tuesday, the company announced it would lay off hundreds of employees in its corporate offices, and relocate many more from remote work or satellite offices to its headquarters in Arkansas. And the company disclosed plans last month to close all 51 of the healthcare clinics it opened after entering the space in 2019, saying the business wasn’t financially viable. Seems like health does not make wealth, in this instance.

The Biden administration, which hasn’t exactly been cottoning to Beijing trade practices lately, blocked more than two dozen textile companies from exporting to the US by adding them on Thursday to a list of Chinese businesses that allegedly exploit forced labor. 

The bans not only attempt to address human rights violations but also aim to protect domestic textile producers from unfair competition, The Wall Street Journal reported.

You Just Made the List

China’s northwest region of Xinjiang accounts for about 20% of the world’s cotton supply, so it looms large in the global clothing industry. However, the area has long been suspected of using forced labor — specifically that of the predominantly Muslim Uyghur minority — to harvest and manufacture crops. China’s government has repeatedly denied the accusations. 

In 2022, the US created the Uyghur Forced Labor Prevention Act (UFLPA) Entity List, effectively banning all imports from the region. But China’s position as the largest exporter of textiles and clothing to the US makes it especially hard to track cotton throughout supply chains, so the stuff still ends up on American soil:

• The 26 additions made to the list, which brings the total to 65, specifically target textile middlemen that mostly sell to Chinese companies. “We will not allow goods produced in whole or in part through forced labor to enter the United States,” Homeland Security Secretary Alejandro Mayorkas said.
• Lawmakers have previously said the government shouldn’t just encourage companies to scrutinize their own supply chains for evidence of forced labor but actively pursue criminal charges against those who benefit by misleading US businesses.  

Cheap Goods: A large loophole in the UFLPA list also exists for “de minimis” shipments. Packages worth $800 or less can enter the country without duty and little customs oversight, which is quite a leg up for e-commerce and fast-fashion businesses that sell outrageously cheap goods. A 2023 report from a House select committee found that 1 billion de minimis packages came into the US that year, mostly from China. Fast-fashion leaders Temu and Shein — neither of which are on the UFLPA list — accounted for a third of them.

“China’s unchecked foreign predatory trade practices, coupled with a lack of customs enforcement and misguided trade policy proposals, have created an unstable market dynamic that is threatening the future of domestic textile manufacturing,” Kim Glas, the president of the National Council of Textile Organizations, said earlier this week after Biden raised tariffs on electric vehicles imported from China to roughly 100%.

Europe sure doesn’t think the kids are alright.

The European Commission said Thursday it initiated an investigation into whether Instagram and Facebook breached rules laid out by the Digital Services Act (DSA) — a muscular and relatively new piece of European legislation aimed at protecting minors online. This is far from Meta’s first rodeo, but the threat posed by the DSA might have more power to punish Meta than what it’s previously dealt with.

Screen Addiction Addicts

The EC probe targets three areas where Meta may be failing in its obligations: its algorithms may be stimulating “behavioral addictions in children,” it’s not effectively verifying users’ ages, and it may not be meeting the DSA’s high standards of privacy for underage users. 

An EC spokesperson confirmed to The Daily Upside that by “behavioral addictions,” the Commission means a platform’s design, not the content it shows, since algorithms push content similar to what a child has already consumed to keep them engaged. Other lawmakers, including in the US, have struggled to make this accusation stick:

• Social media “addiction,” or the idea that social media (or any online platform) is addictive because of its engagement-chasing algorithms, is not a scientific fact. 
• Studies on social media’s impact are complex, and a recent study done by the Oxford Internet Institute of 2 million individuals identified a positive correlation between internet usage and psychological well-being.

That’s not to say there aren’t nuances. The same study found that people who reported a negative relationship with internet usage tended to be young women aged 15 to 24. 

Meta’s European Tightrope: Even if proving addiction is tricky, the DSA already forced Meta into some fairly meaningful changes. Last October, Meta stopped showing ads to people 18 and under as a pre-emptive move so the EU wouldn’t accuse it of breaching the DSA by hoovering up minors’ data for advertisers. It also gave adult users the option to have paid accounts sans ads, but that’s a whole other can of privacy worms.