Walmart's (WMT -0.66%) latest earnings report was packed with good news for investors about the business: The company grew sales on top of soaring results a year ago and projected another solid annual performance ahead in fiscal 2023.
Walmart is using its size advantage to help win market share against competitors, both big and small, which are struggling to find enough inventory and labor today. The chain is capitalizing on a new focus on prices, too, as inflation jumps.
Let's take a closer look.
Winning in the grocery aisle
Walmart's growth slowed compared to a year ago but stayed in positive territory. Comparable-store sales (or "comps") were up 6% this past holiday season vs. a 9% spike in late 2020.
The chain achieved that growth with a balance between rising spending and higher customer traffic. Walmart handled 3% more visitors, who collectively spent 2% more on each trip. Management said the market share wins were especially strong in groceries, which likely means more gains against peers like Kroger.
Securing the goods
Few companies have anything approaching Walmart's buying clout (it just booked its first quarter of over $105 billion in U.S. sales). The company is taking advantage of that size mismatch by stuffing its shelves while peers struggle to find enough merchandise to satisfy shoppers.
Inventory was up 28% this quarter, allowing the chain to avoid out-of-stock situations over the holidays and putting it in a great position to meet demand through early 2022.
Offering lower prices
Walmart was also able to secure better prices across niches like fresh foods, consumer electronics, and health and beauty products. That win has allowed its pricing advantage to grow compared to pre-pandemic times, just as inflation became a bigger concern for shoppers.
And customers noticed. Walmart boosted its U.S. comp sales by 15% on a two-year basis this past year. The retailer didn't have to sacrifice much in terms of profitability, either. Gross profit margin actually rose in the core U.S. market. "We had another strong quarter to finish off a strong year," CEO Doug McMillon said in a press release.
Returning cash to investors
Shareholders won't have to wait long to see the payoff from these successes. Walmart is projecting higher profits and slightly expanding margins in 2023, even as many of its peers warn about weaker earnings ahead. The chain also sees sales growth staying in positive territory after two straight years of big gains.
Walmart plans to spend at least $10 billion on stock buybacks this year, and its dividend just increased another 2%, marking its 49th consecutive year of raises.
Some investors might be turned off by what looks like modest increases in sales, earnings, and cash returns ahead in 2022. But Walmart is building off of a huge base that has expanded quickly since the start of the pandemic.
Inflation and supply-chain issues in the industry only make it stronger relative to its retailing peers, too. As a result, Walmart should continue delivering solid returns for shareholders over time.