Dive Brief:

• Walmart on Thursday reported its best Q1 comparable sales figures in nine years, with comps jumping to 3.4% in the first quarter. Total revenue in the quarter rose 1% year over year to $123.9 billion.
• Walmart U.S. e-commerce sales rose 37%, helped along by "strong growth" in online grocery sales and Walmart.com sales of home and fashion goods, the company said. Sam's Club e-commerce sales were up 28%. Brick and mortar didn't fare as well, comp sales rose at a sluggish 0.3%, hurt by a decline in tobacco sales, the company said. 
• Capital expenditures increased $400 million to $2.2 billion while operating income fell 4.1% to $4.9 billion.

Dive Insight:

Walmart spent Q1 signaling once again its seriousness in competing with Amazon online. Not least among its moves, it announced this week that it would offer next-day delivery on popular merchandise to major metro areas in the Southwest. Walmart CEO Doug McMillon said in prepared remarks Thursday that one-day shipping is set to cover 75% of the U.S. by the end of the year.

The announcement came less than three weeks after Amazon signaled it was moving toward one-day shipping for Prime members, but it had been in the works for the past two years. It's another weapon in Walmart's arsenal, on top of in-store pickup for online purchases that present a major advantage for Walmart given its nearly 2,500 locations in the U.S.

Neil Saunders, managing director of GlobalData Retail, noted in emailed comments that Walmart's online sales spike "makes Walmart one of the best growing mature retailers in the online market."

"Pleasingly, many of these new customer acquisitions are coming from non-traditional Walmart segments including younger and more affluent shoppers," Saunders said, adding that the retailer is "a major competitive force in e-commerce and is capable of capturing shopper share from Amazon and others."

Moody's analyst Charlie O'Shea noted in emailed commentary that Walmart's Q1 represents "meaningful gains on its various strategic investments" and that the company has been able to make those investments while protecting its margins through "improved efficiencies."

Along with next-day delivery, Walmart made a slew of other moves during the quarter as it tries to buffer its market share and compete with Amazon. Among them: voice ordering for grocery through Google Assistant; launch of an online pet pharmacy and a personalized online baby registry; a pilot program for making online purchases with SNAP; exclusive brands in denim, home and baby categories; a premium beef offering through a new supply chain; and several other initiatives.

One of its biggest payoffs is the investment in its grocery pickup service, which the retailer offers for free compared to other retailers. This service provides consumers with another outlet to make Walmart their destination grocery store, and it's noteworthy that a large portion of its grocery pickup users are new shoppers — giving Amazon a run for its money. Along with its Jet.com initiatives, Walmart has surpassed Amazon as consumers' online grocer of choice. 

Walmart's weak spot during the quarter was its international arm, where the inclusion of Flipkart ate into its operating income, and currency effects ate into net sales and profits in its international portfolio. The company indicated it is eyeing an initial public offering to unload its Asda supermarket chain in the United Kingdom, which Walmart tried to sell to a rival chain but was blocked by regulators, and has been struggling of late. Generally and over the long term, "Walmart's dual approach of localizing international operations will pay dividends," Saunders said.

Walmart's size and financial health give it plenty of advantages. So does its grocery offering, which will likely help insulate it from tariffs on Chinese goods that many other retailers, especially in apparel categories, will likely be wrestling with, according to a recent note from Cowen and Company analyst Oliver Chen. Walmart's scale and reach could also help it negotiate lower prices from its Chinese suppliers, Chen noted.