Walmart reports strong third quarter thanks to food unit volume growth milestone

Backed by the strongest food unit volume growth in four years and a continued surge in discretionary merchandise, Walmart announced it would increase its net sales growth projections for the full year during its third-quarter earnings call on Tuesday.

The big-box retailer beat earnings and revenue expectations, putting Wall Street in a celebratory mood, as Walmart’s stock price rose almost 4% by midday.

Following the strong earnings report, Walmart raised its full-year guidance. The retailer now expects full-year sales to grow by 4.8% to 5.1% (compared to the original forecast of 3.75% to 4.75%) and operating income to increase by 8.5% to 9.25% (compared to 6.5% to 8% previously).

In the U.S., net sales came in at $114.9 billion, a 5% year-over-year increase. Comparable sales excluding fuel were up 5.3% from a year ago. Transactions rose by 3.1% year over year, and the average ticket increased by 2.1%.

Share gains in the third quarter, in both transaction counts and unit volumes, were primarily driven by upper-income households.

“We’re broadening our assortment, improving customer experience, and earning their trust, while seeing share gains as a result,” Walmart CFO John David Rainey said during the earnings call. “We’re also realizing the benefits from the investments we’ve made in our core omni-retail business and seeing improved profitability with newer businesses.”

Ecommerce remained strong, with Walmart posting a 22% increase year over year. Store-fulfilled delivery grew nearly 50% and surpassed a $2.5 billion monthly run rate. This marked the 12th consecutive month that the Bentonville, Ark.-based retailer had deliveries exceeding $2 billion.

Walmart Connect grew by 26% year over year, and membership income was up by double digits.

Rainey also mentioned that Walmart generated mid-teens growth in health and wellness, largely due to branded pharmacy scripts, including GLP-1.

“U.S. customers remain resilient, with behaviors largely consistent over the past four to six quarters,” Rainey said. “They continue to seek value to maximize their budgets while also choosing convenient options to save time.”

On the Sam’s Club side, net sales excluding fuel were $20.3 billion, a 7.2% year-over-year gain. Comparable sales excluding fuel were up 7%. Transactions increased by 6.4%, while the average ticket rose by 0.5% year over year.

Sam’s Club saw strong sales growth across both club and digital channels for the quarter, driven by food and health and wellness categories.

Ecommerce sales grew by 26%, and membership income spiked by 15%.

Sam’s Club opened a cashier-less store in Grapevine, Texas, on Oct. 17. Shoppers can use Scan & Go to check out and also use QR codes to find items on the Sam’s Club app.

Scan & Go sales penetration rose by more than 250 basis points during the third quarter.

Rainey said during the earnings call that Walmart plans to open 30 new clubs using the frictionless model in the coming years.

“We made quite a few changes to the design of this club,” Walmart President and CEO Doug McMillon said during the earnings call. “We’ve expanded the area for curbside pickup and delivery orders, created new category adjacencies with consumables near the pickup and delivery staging area, and developed a stronger general merchandise presentation that has improved the sales mix of those categories.”

McMillon added that technology remains a driving force behind Walmart’s business. The big-box retailer is also continuing to develop its personal shopping assistant powered by generative AI.

“I’m excited about how it will improve the customer experience in the months and years to come,” McMillon said.

In late September, Walmart announced it was preparing to offer shoppers an enhanced pay-by-bank option. The option, first available in early 2024, took three days to finalize transactions. The improved version, which involves Fiserv’s NOW Network, makes those  transactions instantaneous.

This technology will enable Walmart to avoid paying fees to credit card companies.

Ghost Kitchen Brands, which operates restaurants inside Walmart stores in the U.S. and Canada, announced in October that it had tapped robotics company RichTech as a franchisee for 20 locations in Arizona, Colorado, and Texas.

RichTech currently operates in Ghost Kitchen restaurants at two Walmart locations in Dawsonville, Ga., and Rockford, Ill. The outlets feature RichTech’s beverage robot, ADAM. The egg-shaped robot with arms can make coffee, boba, and mixed drinks.

The deal will expand ADAM to 240 locations.

Automated systems in Walmart distribution centers have also reached 50%.

The retailer is currently installing high-tech automation in regional distribution centers in Buckeye, Ariz., and Searcy, Ark.

This investment is part of Walmart’s broader initiative to renovate all 42 of its distribution centers. Once complete, the centers in Arizona and Arkansas will be able to ship nearly double the number of cases compared to traditional regional distribution centers.