Dive Brief:
- Walmart on Tuesday reported an 8.7% year-over-year revenue increase to $152.8 billion for the third quarter. Walmart’s U.S. comp sales were up 8.2%, and e-commerce increased by 16%.
- The retailer’s operating income fell 53% from last year to $2.7 billion, including $3.3 billion in legal charges “related to opioid legal settlements,” which the company announced a settlement framework for to resolve outstanding lawsuits. Gross profit rates dropped by 89 basis points in part due to markdowns and a mixture of U.S. sales. Grocery sales were a standout for the company, with the U.S. business gaining market share according to CEO Doug McMillon, but general merchandise experienced a decline in comp sales with markdowns pressuring gross margin.
- Walmart also raised its full-year guidance, expecting net sales growth of 5.5% compared to a previously projected 4.5%. Adjusted operating income is now expected to decline by 6.5% to 7.5%, a more positive outlook than previously expected 9% to 11%.
Dive Insight:
Where some retailers are experiencing the negative impacts of inflation, Walmart is finding increased market share in some areas.
“We significantly improved our inventory position in Q3, and we’ll continue to make progress as we end the year,” McMillon said in a statement. “From The Big Billion Days in India, through our Deals for Days events in the U.S. and a Thanksgiving meal that will cost the same as last year, we’re here to help make this an affordable and special time for families around the world.”
On an earnings call with analysts Tuesday, McMillon said that shoppers who came less frequently in the past have been shopping more often with the company, including higher-income consumers.
McMillon also told analysts that the company is focused on earning repeat business with consumers, which includes a focus on strong apparel presentation, providing seamless pickup and delivery options, as well as selling more Walmart+ memberships. The company cut the price of such memberships in half earlier this month as part of a holiday promotion.
Some analysts were positive about the retailer’s results and updated outlook in the face of macroeconomic issues.
“Walmart's sharp price point reputation helps the retailer prevail, again,” Insider Intelligence Principal Analyst Suzy Davidkhanian said in emailed comments. “Despite a difficult retail backdrop: mixed economic headlines, ongoing supply chain woes and consumers continuing to spend on experiences, Walmart's intensification in basics and replenishment goods, especially in grocery, coupled with its ongoing promise to roll back prices help the retail giant deliver strong quarterly results.”
That said, other analysts pointed out that the retailer’s success isn’t the same across its entire business.
“When consumer finances get tough, Walmart gets going,” Neil Saunders, GlobalData managing director, said in emailed comments. “Despite grocery success, Walmart is not replicating this across general merchandise. Here, sales are down by low single digits over the prior year. Given the higher customer numbers this underlines the fact Walmart is not doing a good enough job of enticing its food shoppers across the aisle to buy non-food products.”
Walmart isn’t alone in its struggles. The retail industry at large is dealing with a variety of challenges, with companies like Wayfair losing 1 million customers in its latest quarter, Party City cutting its corporate workforce by 19% and Amazon reportedly planning to cut about 10,000 jobs including in its retail division.
