Don't tell Wal-Mart (NYSE:WMT) that retail's dead.

The discount behemoth reported strong third-quarter results, including accelerating growth in its stores and surging e-commerce sales.

Wal-Mart Stores results: The raw numbers


Q3 2018

Q3 2017

Year-Over-Year Change


$123.179 billion

$118.179 billion


Operating income

$4.764 billion

$5.119 billion


Adjusted EPS




Data source: Wal-Mart Stores Q3 2018 earnings press release. EPS = earnings per share.

What happened with Wal-Mart Stores this quarter?

Total revenue rose 4.2% to $123.2 billion, and 3.8% when excluding the impact of foreign exchange. U.S. comparable-store sales increased 2.7%, including a 1.5% rise in traffic. Sam's Club delivered comps growth of 2.8%. And 10 of Wal-Mart's 11 international markets posted positive comp sales.

A Walmart storefront

Image source: Wal-Mart Stores.

Notably, Wal-Mart's U.S. e-commerce sales surged 50%, as gross merchandise volume -- essentially, the total dollar value of goods and services sold on its e-commerce platforms -- soared 54%. Online grocery, which is now available in more than 1,100 Walmart locations, has helped to fuel this growth, and the company expects to roll it out to another 1,000 stores in the year ahead.

"Existing customers have become advocates for popular initiatives like online grocery and free two-day shipping, and as a result, new customers, suppliers, and partnerships are coming to Wal-Mart," said CEO Doug McMillon during a conference call with analysts.

Better still, Wal-Mart's profits appear to be stabilizing. It's true that price cuts continue to weigh on the retailer's gross margin, which fell 29 basis points to 25%. And operating income declined 6.9%, to $4.8 billion. But if we adjust for $150 million in hurricane-related losses, a $150 million impairment charge due to Wal-Mart's decision to exit certain properties in one of its markets, and other non-recurring items, operating income would have increased year over year.

Moreover, the retail titan remains a cash-generating machine. So far in fiscal 2018, Wal-Mart has produced $17 billion in operating cash flow and more than $10 billion in free cash. In turn, the company rewarded its shareholders with $1.5 billion in dividends and $2.2 billion in share repurchases in the third quarter.

Looking forward

For the fourth quarter, Wal-Mart expects comp sales for both its U.S. Walmart and Sam's Club stores to rise between 1.5% and 2%.

Management also raised its fiscal 2018 full-year adjusted EPS guidance to between $4.38 and $4.46, up from a prior estimate of $4.30 to $4.40.

"We have momentum, and it's encouraging to see customers responding to our store and e-commerce initiatives," McMillon said in a press release. "We are leveraging our unique assets to save customers time and money."

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.