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 1.79%) 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.
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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 1.98%), 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."
