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Brief description of the dive:
- Walmart’s global revenue for the third quarter rose to $160.8 billion, up 5.2 percent from last year, the company said in an earnings release Thursday. E-commerce for Walmart’s US segment rose 24%, led by pickup and delivery. E-commerce was up 16% for Sam’s Club and 15% globally.
- Comparable sales rose 4.9% for Walmart US and net sales rose 4.4% to $109.4 billion, but operating income fell 2.2% to $5 billion. That was below expectations due to higher-than-expected costs, executives said on a call with analysts.
- Walmart raised its full-year consolidated net sales guidance to a range of 5% to 5.5%, from 4% to 4.5%. For consolidated operating income, Walmart maintains guidance for growth in the range of 7% to 7.5%.
Walmart customers continue to make trade-offs “to be able to afford the things they want given the continued high cost of the things they need,” Chief Financial Officer John David Rainey told investors and analysts on a call for the profits.
Nonetheless, Walmart “delivered strong Q3 results across the board, with the top and bottom lines beating Street estimates,” Jefferies analysts led by Cory Tarlow said in a note. “We believe [Walmart] is well positioned going forward to witness continued strength in the upcoming festive season and continue to gain share.”
Walmart executives noted that its e-commerce segment continues to perform well. The company continues to make investments in its supply chain and fulfillment infrastructure.
Rainey said Walmart opened its third next-generation e-commerce center last quarter. The facilities, which are about 1.5 million square feet each, are expected to double the number of customer orders fulfilled daily and will expand next-day and two-day deliveries to nearly 90 percent of the U.S., including market items delivered by Walmart Fulfillment services.
In addition, the company expects to have seven stores with automated fulfillment centers by the end of this month, executives said on the call. The centers stock thousands of the most popular items and their presence in the supply and fulfillment chain will increase order capacity, productivity and inventory accuracy.
“As we focus on improving e-commerce margins, we are making good progress in reducing digital fulfillment costs and densifying the last mile by leveraging our extensive network of stores and clubs,” Rainey said.
“We recently experienced a higher degree of volatility in weekly performance between the US holiday events, including seeing a softening in the back half of October that was off trend for the rest of the quarter,” Rainey continued.
Walmart’s third-quarter e-commerce growth was “impressive,” said Neil Saunders, managing director of GlobalData, in emailed comments. “Walmart, in our view, has made very strong inroads on the online grocery front and has built a strong reputation for reliability,” Saunders said. “It is also making progress in online general merchandise thanks to its expanded marketplace.”
Walmart is also investing in a significant store renovation program that is resonating with customers, Saunders said. “We have visited some converted formats and are impressed with the elevation of the overall merchandise offering, particularly in home and apparel,” Saunders said. “This should help convert more new shoppers and will put Walmart in a good position with core shoppers once the economy starts to improve and their purchasing power improves.”
Company executives said November sales increased as the weather changed and the holiday season began. As a result of “somewhat uneven” sales, Walmart is thinking “a little more cautiously about consumers compared to 90 days ago,” Rainey said.
Looking ahead, “we expect the relationship between earnings and sales growth to favor profitability in Q4 and for the full year to align with our goal of operating income growing faster than sales,” Rainey said.