Walmart Q3 tops estimates on strong U.S. sales; strikes cautious note

Walmart reported third-quarter earnings and revenue that topped expectations with growth across all segments. Grocery once again led U.S. sales.

The retail giant also raised its annual outlook, although it came in slightly below what analysts were expecting. On the company’s earnings call, executives noted that prices for select grocery items have fallen, along with general merchandise prices.

“In the U.S., we may be managing through a period of deflation in the months to come and while that would put more unit pressure on us, we welcome it, because it’s better for our customers,” CEO Doug McMillion told analysts on the call.

Walmart’s net income rose to $453 million, or $0.17 a share, in the quarter ended Oct. 27, compared to a loss of $1.8 billion, or $0.66 a share, in the year-age period. (The loss had to due with an settlement over opiod-related legal charges.)  Adjusted earnings per share earnings came to $1.53, just ahead of analysts’ estimates of $1.52 per share.

Total revenue rose 5.2% to $160.8 billion from $152.8 billion, topping estimates of $159.72 billion. Walmart’s global advertising business  grew about 20%, with Walmart Connect revenue up 26%. 

"Walmart’s 3Q report demonstrates the power of the company’s scale, execution, and value price focus in an increasingly volatile U.S. spending environment," commented David Silverman, senior director, Fitch Ratings. "The company reported positive revenue growth, which Fitch expects is driven by the company’s low-price positioning, consumables focus, and recently strong execution, which has helped the company differentiate itself from peers on omnichannel enhancements and shopping experience."

In the U.S., Walmart’s same-store sales rose 4.9%, while e-commerce sales rose 24%, led by strength in pickup and delivery. Average transactions rose 3.4% amid share gains in grocery.  The average ticket was up 1.5%.  Along with grocery, the retailer cited sales strength in health and wellness; merchandise sales “declined modestly.” 

Walmart’s international sales rose 5.4% to $26.7 billion.

At Sam’s Club U.S., sales rose 2.8% to $22.0 billion from $21.4 billion a year ago, led by food and consumables, and health care. E-commerce sales rose 16%, led by curbside and delivery. Same-store sales rose 3.8% and transactions were up 4%. 

“We had strong revenue growth across segments for the quarter, and we’re excited to get an early start to the holiday season, stated McMillion in the earnings release. “Looking ahead, our inventory is in good share, the teams are focused, and our associates are ready to serve our customers and members whenever and however they want to be served.’

For the year, Walmart expects adjusted earnings per share of $6.40 to $6.48, higher than its previous range but ower than the $6.48 analysts are looking for. The retailer expects consolidated net sales will rise 5% to 5.5%, which is also up from its prior range.