Walmart (WMT 0.61%) delivered robust revenue growth in the third quarter, observing strength across all global segments. And because of Q3's stellar performance, the retail behemoth raised its full-year guidance for consolidated sales growth by 1%, now expecting around 5.5% improvement for the year. 

Despite strong sales growth and expectations, Walmart posted a net loss of $1.8 billion in the third quarter. Let's examine the company's results and why the consumer staples stock remains a hold. 

It was a good quarter

Q3 sales beat both analysts' and the company's own expectations, reaching over $150 billion. Walmart enjoyed strong top line performance across all three of its business segments: Walmart U.S., Walmart International, and Sam's Club.

Encouraged by the sales growth, CEO Doug McMillon described Q3 as "a good quarter," despite posting a $1.8 billion loss compared to last year's $3.1 billion profit. McMillon remains confident about Walmart's ability to align with the needs of customers and members worldwide.

Indeed, Walmart reports seeing strength across all facets of the business, including stores across the world, Sam's Club locations, and e-commerce. So far in 2022, 13% of Walmart's sales were initiated "in a digital fashion." And online sales are accelerating, climbing 16% between the second and third quarter of this year alone. From a constant currency standpoint -- eliminating the effect of currency exchange rates on sales figures -- e-commerce grew 46% year over year.

In a recent trend highlighted in Walmart's Q2 results, higher-income shoppers are now selecting Walmart over their previous retail options for both in-store and online purchases. With the cost of everyday items on the rise this year, Walmart has enjoyed an influx of new customers from households exceeding $100,000 in annual income. In Q3, the company observed an uptick in frequency from these shoppers, and now aims to retain them indefinitely. 

Overstock and currency headwinds

While the general tone of the Q3 earnings call was positive, CFO John David Rainey expressed that "the macro backdrop remains challenging," as relentless inflation affects Walmart's customers as well as the business.

Aside from inflation, unfavorable currency exchange rates negatively affected sales by an estimated $1.5 billion in Q3. Had foreign exchange rates not cost Walmart $1.5 billion last quarter, the company would have come out almost even. Rainey cited "significant currency headwinds" during the Q3 earnings call. 

Sales of general merchandise such as electronics, home appliances, and clothing endured a low single-digit loss in Q3 as Walmart attempted to sell through an oversupply of inventory. Walmart's year-over-year inventory was up 13% in Q3, which is actually an improvement over the previous two quarters. Referring to the glut of inventory, Rainey said that "inventory remediation efforts are progressing."

Walmart is selling through its surplus, but markdowns have taken a toll on the  company's profit margin, reducing it by 89 basis points year over year. In fact, more than half of the decline in Q3's gross profit margin decline was attributed to markdowns among Walmart U.S. sales.

A recession-proof investment

Looking ahead, Walmart seeks to regain profitability by improving both its inventory and supply chain. One strategy to accomplish this includes better vendor sales agreements to reduce costs and mitigate the effects of inflation.

Another strategy is fine-tuning the inventory itself. As McMillon explains, "We're being thoughtful and balanced about inventory levels by category and expenses as we work through the fourth quarter and position ourselves for next year." While sales are always unpredictable, Walmart seeks to avert another inventory-glut situation.

After a better-than-expected Q3, Walmart updated its full-year guidance for net sales growth from 4.5% to 5.5%. That figure has taken both inflation and a potential slowdown in consumer spending into account. 

Rainey feels the company is "well-equipped" to keep gaining market share, regardless of the current macroeconomic conditions. He thinks Walmart will convert even more new customers as money-saving trends persist. Walmart is well-positioned to benefit from the current economic slowdown, and that's why I think its stock remains a hold in spite of its Q3 net loss.