Please ensure Javascript is enabled for purposes of website accessibility

3 Key Takeaways From Walmart's Earnings Report

By Demitri Kalogeropoulos – Nov 18, 2018 at 1:30PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The world's biggest retailer is clawing back market share heading into the industry's biggest selling weeks.

It isn't hard to grow sales in a strong economy, and that challenge gets even easier when you have the right retailing strategies in place. Of course, it also helps to have the world's biggest selling footprint, like Walmart (WMT 0.43%) does.

In its final quarterly earnings release before the start of the key holiday shopping season, the retailing titan just demonstrated how its multichannel selling approach is delivering accelerating sales and profit growth to keep it ahead of many of its smaller peers. 

A couple shops for a TV.

Image source: Getty Images.

Thinks keep looking up

Back in August, the company revealed some of the strongest demand trends it has achieved in a decade, and Walmart went on to build on that positive momentum over the next few months. For the summer period, comparable-store sales improved by 3.4% in the core U.S. market thanks to a mix of higher customer traffic, increased average spending per visit, and surging e-commerce sales.

Together, these improvements added up to a slowdown from the prior quarter's 4.5% sales spike. However, that's mainly a side effect of the elevated, hurricane-fueled revenue that Walmart logged in the prior-year period. In a conference call with analysts, executives noted that the combined 2-year growth was above 6%, just as it was last quarter. "It has been over ten years since we've had back-to-back quarters with two-year ... comps above 6%," they noted. 

Winning share

CEO Dough McMillon admitted that industry tailwinds played a big role in Walmart's latest growth. However, the company is also stealing market share in key categories like fresh food groceries. That's likely bad news for Kroger (KR 2.51%), which has been losing business to its chief rival in recent quarters.

Walmart's e-commerce sales are outpacing the broader industry, too, as customers enthusiastically sign up for grocery pickup and home deliveries. The online sales channel spiked 43% this quarter and accounted for 1.4 percentage points of the overall comps gain, compared to 1 percentage point in the fiscal second quarter.

Early success here has Walmart even more confident about the online grocery ordering niche. "Grocery pickup has consistently delivered one of the highest [customer satisfaction] scores we've ever had," management said, so the retailer is moving quickly to expand its pickup and same-day delivery options to its entire national selling footprint.

Onward and upward

These wins formed the foundation for Walmart's second straight full-year sales and profit outlook upgrade. Comps are now predicted to rise by a bit more than 3% in the U.S., compared to the 3% target they laid out in August and the 2% initial goal. Peers including Target and Costco are on pace for stronger results, but Walmart's demand trends are still headed in the right direction.

Overall adjusted earnings should expand more quickly than sales, rising 8% to between $4.75 and $4.85 per share.

As usual, actual results could differ significantly from these updated predictions. However, the company's momentum implies that, if anything, it might modestly outperform expectations when the holiday shopping season officially kicks off in a few days. "Customers are responding to the improved omnichannel shopping experience, and this is translating nicely to market share gains," executives summarized for investors. "We feel good about our competitive position heading into the holiday season."

Demitrios Kalogeropoulos owns shares of Costco Wholesale. The Motley Fool recommends Costco Wholesale. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Walmart Inc. Stock Quote
Walmart Inc.
WMT
$153.07 (0.43%) $0.65
Kroger Stock Quote
Kroger
KR
$49.04 (2.51%) $1.20

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
360%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.