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4 Ways Walmart Crushed Its Earnings Report

By Jeremy Bowman - Nov 14, 2019 at 4:25PM

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Here are the big numbers you need to know from the retail giant's third-quarter financials.

Walmart ( WMT -0.32% ) just turned in another strong earnings report.

Investors initially cheered the numbers, sending the stock up as much as 3.6% in early-morning trading on Thursday, but the stock cooled off over the course of the session and was actually trading down 0.2% at the close of trading. That pullback was likely a reflection of how far Walmart stock has come this year, as the stock is already up 30% in 2019, a sign that market now expects the retail giant to knock it out of the park every quarter.

Let's take a look at the big numbers from the world's biggest retailer. Here are four ways Walmart crushed it in its third-quarter earnings report. 

A scene at a Walmart checkout area

Image source: Walmart.

1. Walmart U.S. comparable sales rose 3.2%

Comps at the company's biggest segment, Walmart U.S., ticked up 3.2% year over year, accelerating from its second-quarter growth rate of 2.8%. Walmart saw both a year-over-year increase in guest traffic (up 1.3%) and average ticket (up 1.9%), meaning the company is both getting more customers to visit its stores and shop online, and its coaxing them into spending more on each visit. E-commerce was also a significant driver of comparable sales growth, accounting for slightly more than half of the increase.

Comps were up 6.6% on a two-year basis, marking five out of six quarters that two-year comps have increased 6% or more.

2. E-commerce sales surged

Anchored by its expanding online grocery pickup program, which is now available at 3,100 stores,  Walmart's e-commerce sales jumped 41% year over year in the quarter, accelerating from 37% in the second quarter, boosted by strong performance in online grocery.

Walmart now offers grocery delivery from 1,400 stores and also has "pickup towers" in 1,400 locations. Additionally, the retailer made strides to extend the reach of online grocery with the launch of Delivery Unlimited, a $98 per year membership program that gives customers unlimited grocery deliveries from 1,400 stores, and it unveiled InHome Delivery, where Walmart puts your groceries in your fridge for you, in Kansas City, Pittsburgh and Vero Beach, Florida, serving roughly 1 million total potential customers. 

Based on those initiatives, it's clear that Walmart will continue to count on grocery to lead the way in e-commerce. It also said comparable sales in grocery grew by mid-single digits.

3. Profits were up, too

Walmart's same-store sales growth wasn't for naught. The company's U.S. division controlled expenses while growing sales, delivering operating leverage and operating income growth year over year of 6.1% to $4.18 billion. Overall, Walmart's operating income declined due to the addition of Flipkart, and profits fell at Sam's Club as it lowered prices. 

Nonetheless, adjusted earnings per share (EPS) increased from $1.08 to $1.16, which beat estimates of $1.09.

4. Walmart raised guidance

As a sign of its strong performance in the third quarter and optimism for the holiday season, Walmart lifted its full-year earnings guidance, calling for a slight increase to its adjusted EPS growth including Flipkart, compared to previous guidance of flat growth, and high-single-digit growth excluding Flipkart, up from a prior range of low- to mid-single-digit increase. That should give investors some encouragement heading into the holiday season.

What it all means

Walmart is executing on its strategic initiatives, including the key expansion of its online grocery program. While Walmart U.S. remains strong, the company is also seeing impressive growth at Sam's Club, where comparable sales rose 4.1% year over year, excluding fuel and tobacco. Internationally, results were mixed as comparable sales increased in seven of its 10 markets. At Flipkart, the company touted the success of The Big Billion Days sales event, where it had record sales and saw a near 75% increase in new customers. 

Overall, Walmart is carrying solid momentum into the key holiday quarter. CFO Brett Biggs summed it up, saying, "Our competitive position is strong, we're operating efficiently and we're innovating to make it easier to shop with Walmart in the U.S. and in our markets around the world."

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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