The international retail giant will report fiscal 2022 third-quarter earnings on Nov. 16. Walmart (WMT -0.10%) benefited at the pandemic onset when it was deemed an essential retailer and allowed to stay open while many other businesses were forced to close their doors. As a result, sales increased for the company that boasts four consecutive years of over $500 billion in annual revenue. 

Economies are reopening, presenting new challenges for businesses, Walmart included. Customer demand remains high while production is constrained, and the supply and demand imbalance is raising costs for businesses and consumers alike. It will be interesting to see if Walmart could use its large scale to keep costs under control when it reports third-quarter earnings results. 

A family taking a cart full of groceries to the car.

Image source: Getty Images.

Walmart's buying power keeps costs under control

Despite consumers having more choices on where they can spend their money, Walmart continues increasing sales. In its most recent quarter ended July 31, Walmart reported revenue of $141 billion, a 2.4% increase from the same quarter the year before. 

Management expects the sales momentum to continue into the third quarter. They expect growth of 6% to 7% in comparable-store sales, which excludes the impact of new store openings and closings.

Fulfilling customer demand for sales close to $150 billion in a quarter is no easy task under normal business conditions, and these are anything but regular times. A COVID-19 outbreak at one manufacturing facility can halt production for several weeks. Moreover, port congestion and a widely reported shortage of drivers make it difficult to transport goods to customers. The disruptions cause prices to rise for everything from materials to labor. 

Management noted it is seeing higher than usual cost pressure and is using its buying power to protect its profit margins while offering low prices to its customers. Walmart remains confident in its ability to manage through rising prices and forecasts its operating profits will increase by 11.5% to 14% for the fiscal year 2022 with two quarters remaining.

Walmart's stock is up only modestly in 2021

Analysts on Wall Street expect Walmart to report revenue of $135.5 billion in Q3 and earnings per share (EPS) of $1.39. If the company hits the EPS estimate, it would be an increase of 3.7% from the same quarter a year ago.

The estimate on Wall Street is on the higher end of management's guidance in the quarter of $1.30 to $1.40 for EPS. It looks like Wall Street thinks Walmart will have little trouble controlling costs when it reports third-quarter earnings on Nov. 16. Shareholders will be hoping they are right. Walmart stock is up a modest 3.9% year to date. Perhaps a strong showing of its purchasing power will be enough to push shares of the retail giant higher.