Walmart is headed into the holidays with a jolly outlook after posting Q3 online sales growth of 41% and a better-than-expected 3.2% growth rate in U.S. same-store sales. The company attributed the online sales growth to ongoing expansion of its online grocery services. Walmart as a whole now generates 56% of its revenue from food and grocery sales.
Walmart has built a network of more than 2,700 grocery pickup locations for online orders across the U.S., and also now offers a “Delivery Unlimited” option from 1,400 locations, where customers can pay $98 annually, or $12.95 monthly, for unlimited grocery delivery. The company has even started testing delivering groceries directly to customers’ refrigerators in three cities — the InHome grocery delivery membership program costs $19.95 a month.
“Improvements in areas like bakery and meats are resonating with customers,” Walmart CFO Brett Biggs said in an earnings call. “We’ve focused on improving fresh presentation and product quality and this has resulted in stronger sales and market share gains.”
Given that online grocery appears to still be in its infancy, with only 3% of U.S. grocery spending taking place online, there is still plenty of growth opportunity for the sector as a whole. Walmart is making continuous investments to gain market share before its biggest competitors can.
Walmart Raises Full-Year Guidance On Good News
In conjunction with the Q3 release, Walmart raised its annual earnings guidance for the second time this year in conjunction. The company expects adjusted earnings per share (EPS) to “increase slightly” compared with last year. Previously, Walmart called for adjusted EPS to range between a slight decrease to a slight increase.
Even as the company struggles with internal disagreements on its e-Commerce investments and their effect on profitability, Q3 net income grew to a healthy $3.29 billion, or $1.15 per share.
With the latest results, Walmart has now posted a 21-quarter streak of U.S. growth, unmatched by any other retail chain.Walmart said the average customer ticket in the U.S. grew 1.9% compared with a 1.8% increase a year ago. Transactions were up 1.3% in the quarter, slightly lower than growth of 1.6% this time last year.
“Growth in overall U.S. revenue, when combined with a 21 basis points operating margin improvement to slightly over 5% in a hotly promotional environment, speaks to the quality of Walmart’s operating discipline, which will come in handy during what is shaping up to be yet another acutely promotional holiday season,” said Charlie O’Shea, VP and Lead Retail Analyst at Moody’s in commentary provided to Retail TouchPoints. “Walmart will again be one of the primary pacesetters, particularly when considering its increased leveraging of its massive store base for online pickup and accelerated shipping, especially in food, which will ripple into other higher-margin categories.”