Strong U.S. Food Sales Pace Walmart in Q3

Wal-Mart Stores continued to show sales momentum in the fiscal third quarter, growing non-fuel U.S. comp sales by 2.7% on increases in store traffic, and average ticket and overall sales by 4.3% in part on continued strong growth of online initiatives and its strongest quarter for food sales growth in nearly six years.

The Bentonville, Ark.-based retailer said e-commerce contributed approximately 80 basis points to comp sales, and that additional sales related to hurricane events in Texas and the Southeast benefited comp sales by 30 to 50 basis points. Store traffic increased by 1.5%.

Gross margin as a percent of sales decreased by 36 basis points as a result of a growing mix of e-commerce sales and continued price investment, while inflation was about the same or slightly down from second-quarter figures.

Food and consumable sales comped in the low single digits driven by the increased store traffic, increased innovation and an improvement in private brand sales, the company said. CEO Doug McMillon in a conference call said fresh meat, bakery and produce teams led the way. Fresh foods—particularly meat, bakery and produce—were particularly strong, McMillon said, driven by improvements in assortment, quality and price. Neighborhood Market stores comped at around 6%.

Walmart also saw strong comps of 2.8% at its Sam’s Club membership warehouses on traffic gains of 3.8%. Stores in Canada saw comps increase by 1%.

The company was able to leverage store expenses, providing the company with fuel to invest in e-commerce, McMillon said.

“It’s important to note that we’ve accomplished this while maintaining high in-stock and service levels for customers. Our associates are using technology and apps for inventory management and price changes that help make their jobs easier and increase productivity in the stores. Store leverage is helping to allow our strategic investments in ecommerce to continue,” McMillon explained. “It’s also exciting to see how we’re removing friction from the customer experience with express pharmacy, an easier money services process and by expanding pickup options with our automated towers and online grocery. We now have online grocery in more than 1,100 stores and look forward to expanding this popular offering to another 1,000 locations next year.”

For the 13-week quarter, which ended Oct. 27, Walmart said U.S. sales totaled $77.7 billion, a 4.3% increase and operating income of $4 billion increased by 0.8%.

Company-wide sales were up by 4.2% to $123.2 billion.

For the fourth quarter, Walmart said it expected non-fuel U.S. comps at its Walmart and Sam’s Club divisions to increase in a range of 1.5% to 2%.