Walmart’s U.S. stores continue sales growth in Q3

Energized in part by e-commerce growth, Walmart turned in another quarter of solid sales gains at its U.S. stores, despite a dip in comparable-store sales at Sam’s Club.

Third-quarter adjusted net earnings per share (EPS), meanwhile, topped Wall Street’s forecast and excluded an unrealized loss on Walmart’s equity investment in Chinese e-tailer JD.com and a charge related to the sale of a majority stake in Walmart Brazil.

Walmart said Thursday that for the fiscal 2019 quarter ended Oct. 31, total revenue edged up 1.4% to $124.9 billion from $123.2 billion a year earlier. In constant currency, revenue totaled $126.1 billion, up 2.4% from $123.2 billion in the fiscal 2018 quarter.

“We’re pleased with the overall results we posted for the third quarter. We continue to see strong comp-store sales. Our results reflect not only value our customers are finding in our offer, and a lot of hard work from the team, but certainly some macro tailwinds as well, especially in the U.S.,” Walmart President and CEO Doug McMillon told analysts in a conference call. “Each of our segments achieved solid sales growth,” he added.

At Walmart U.S., sales for the third quarter came in at $80.6 billion, a 3.7% gain from $77.7 billion a year ago. Comp-store sales excluding fuel rose 3.4% year over year (3.5% with gasoline sales), with same-store increases of 1.2% in traffic and 2.2% in ticket size. E-commerce sales were up 140 basis points, compared with an 80-basis-point gain in the prior-year period, the Bentonville, Ark.-based retail giant reported.

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McMillon noted that Walmart U.S. e-commerce sales jumped 43% sequentially for the quarter.

“We continue to expand our reach from an omnichannel perspective. We now have nearly 2,100 grocery pickup locations, and we’ll have about 700 pickup towers by the end of this fiscal year,” he said. “Grocery pickup has consistently delivered one of the highest Net Promotor Scores we’ve ever had, and that continued throughout the aggressive rollout in Q3. As we’ve learned to do pickup well, it has unlocked our ability to provide delivery. We’re moving quickly on this front as well, and by the end of the year we’ll cover about 40% of the population with delivery through about 800 stores.”

Walmart International sales decreased 2.6% to $28.8 billion but in constant currency were up 1.6% for $30 billion. According to McMillon, “good results in food” helped propel a 2.5% same-store sales increase in Canada.

“We see meaningful price gaps to competitors and, according to Nielsen, we gained market share in certain categories, including fresh foods,” he said of Walmart Canada’s third-quarter performance. “In e-commerce, we delivered net sales growth of greater than 20%, increased the number of SKUs available on marketplace and added new stores that offer online grocery. We also opened a new dedicated fulfillment center that will provide capacity to manage growth as well as to better manage costs.”

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Net sales at Sam’s Club fell 2.3% in the third quarter to $14.5 billion from $14.9 billion a year earlier. Same-store sales, however, climbed 3.2% excluding fuel (5.3% with gasoline) and reflected 6.2% growth in traffic partially offset by a 3% decline in ticket size. E-commerce sales increased by 130 basis points versus a year-ago gain of 80 basis points. Membership income rose 1.6%.

“At Sam’s Club, we saw strong comp-sales growth aided by a strengthened value proposition as we invest in price and improve our assortment,” McMillon said, adding that same-store results benefited from the transfer of sales from closed clubs and 32% sales growth in e-commerce. “The grocery, fresh and consumables categories all performed well, and the penetration of our Member’s Mark brand increased approximately 90 basis points over last year. I’m especially pleased with the performance in fresh. This is an important category for our target member and a key traffic driver for us.”

Results at Walmart U.S. and Sam’s Club cover the 13 weeks ended Oct. 26.

On the earnings side, Walmart totaled third-quarter net income of $1.71 billion (GAAP), or 58 cents per diluted share, compared with $1.75 billion, or 58 cents per diluted share, a year ago.

The company said the results include a 48 cents-per-share unrealized loss from its JD.com investment; a 3 cents-per-share charge for foreign currency on closing the sale of the Walmart Brazil stake; and a 1 cent-per-share benefit from an adjustment related to tax reform. Adjusted EPS was $1.08 for the quarter.

Analysts, on average, projected adjusted EPS of $1.01, with estimates ranging from a low of 93 cents to a high of $1.09, according to Thomson Reuters.

Looking ahead, Walmart pruned its fiscal 2019 GAAP earnings guidance to between $2.26 and $2.36 per share (including the impacts of the JD.com unrealized loss, Walmart Brazil stake sale and tax reform adjustment), compared with its previous outlook of $2.65 to $2.80. However, the retailer lifted its adjusted EPS projection to between $4.75 and $4.85 from its earlier guidance of $4.65 to $4.80.

Chief Financial Officer Brett Biggs reported that Walmart also has higher expectations for full-year same-store sales. “Given the strong Q3 performance and our expectations for the fourth quarter, we are raising our guidance for Walmart U.S. comp sales, excluding fuel, from ‘around 3%’ to at least 3% growth for the year,” he said in the call with analysts.