Dive Brief:
- Walmart’s third quarter consolidated revenue rose 5.5% from a year ago to $169.6 billion, the retailer said Tuesday. Global operating income rose 8.2% to $6.7 billion, up from $6.2 billion year over year.
- Net sales in the U.S. rose 5% to $114.9 billion, up year over year from $109.4 billion. U.S. comparable sales also rose 5.3%, excluding fuel sales. E-commerce sales rose 27% globally and 22% in the U.S., led in part by store-fulfilled pickup and delivery and the company’s marketplace.
- Consolidated operating income grew 8.2% to $500 million on higher gross margins, growth in membership income and reduced losses in e-commerce. The company raised its full-year guidance and now expects net sales to increase 4.8% to 5.1%, up from a prior forecast of a 3.75% to 4.75% uptick.
Dive Insight:
Walmart was among American retailers affected by unexpected events in the third quarter — the U.S. port strike, two major hurricanes and serious, widespread flooding that devastated Appalachian communities in late September.
At the height of the storms and flooding, about 400 Walmarts, Sam’s Clubs and distribution centers were closed. They’ve all reopened, except for two Supercenters that the retailer is working to repair and reopen to shoppers, Chief Financial Officer John David Rainey said during a Tuesday earnings call.
While the storms and the port strike lifted sales growth by a small amount and negatively affected operating income growth by a larger amount, Walmart was still able to deliver on its overall financial framework, CEO Doug McMillion said during the earnings call.
"This was clearly a strong quarter and the changes we've been working on for years are continuing to bear fruit, McMillion said. “We're well-positioned to serve people how they want to be served, whether that's coming into a store, picking up an order or having it delivered.”
According to Rainey, the popularity of expedited delivery has resulted in more than 30% of customer orders coming from people who elected to pay a convenience fee to receive their delivery in less than three hours — or even less than one hour.
“Traditionally, Walmart competed primarily on value, but increased e-commerce adoption and investment now allows Walmart to compete on the equally important and previously unavailable dimension of convenience,” Roth MKM analysts led by Bill Kirk said in a Tuesday note.
The combination of in-store improvements, the company’s strong digital presence and a growing advertising business “is dramatically separating [Walmart] from traditional brick and mortar competitors. Its model is inflecting toward a more profitable, less volatile, wider-reaching ecosystem,” Roth’s analysts said.
Walmart’s U.S. marketplace grew 42% in Q3, Rainey said, and the company has now seen more than 30% growth for the last five quarters. The company said the number of sellers on the platform continues to grow by double digits and its marketplace SKU count has nearly reached 700 million items.
Additionally, that general merchandise also performed better in Q3, delivering a low single digit gain in comparable sales, is another positive for the quarter, Neil Saunders, managing director of GlobalData, said in emailed comments.
Saunders said some of that uplift is attributable to core customers’ improved finances and some of that shift is due to strong seasonal selling occasions like back-to-school, Halloween, and various promotions during the last three months.
“There is no denying that the period of inflation and economic challenge has been helpful to Walmart, much more so than for many other retailers,” Saunders said. “However, the company hasn’t passively stood by and allowed these benefits to accrue; it has worked hard to adapt its proposition. That it continues to do so as the consumer mood-music changes will hold it in good stead for the final quarter and the new year beyond.”
