Walmart’s sales growth streak hits five Years

Retailer posts 3.2 % increase in comparable sales for most recent quarter, boosted by online grocery orders

All captions and graph courtesy by Wall Street Journal

By guest author Sarah Nassauer from Wall Street Journal

American consumers showed no signs of belt-tightening in sales results from Walmart Inc., WMT -0.27 % offering comfort to retailers worried about fallout from the trade war and the health of the global economy as the holiday shopping season nears.

Walmart said its U.S. comparable sales, those from stores and websites operating for at least 12 months, rose 3.2 % in the period ended October 25, 2019 marking a five-year streak of quarterly sales gains. Its e-commerce sales in the U.S. rose 41 % from a year earlier, bolstered by grocery orders.

“We continue to see good traffic in our stores,” Chief Executive Doug McMillon said in a conference call on November 14, 2019.

President Trump weighed in on Walmart’s results, saying they were proof that his administration’s imposition of tariffs on Chinese imports was not driving up prices or slowing consumer spending. “Walmart announces great numbers. No impact from Tariffs,” he tweeted.

More tariffs on consumer goods are scheduled to take effect December 15, 2019 while Washington and Beijing continue to bandy about trade proposals.

Walmart finance chief Brett Biggs told reporters that the company is continuing to monitor those discussions, and its merchants are working on ways to cushion the effect of trade actions. He also said management is keeping tabs on employment rates, fuel prices and wage growth for any economic shifts.

“What we are seeing from the consumer is pretty good and pretty consistent,” Mr. Biggs said in an interview.

Walmart is the first major U.S. retailer to weigh in on its recent performance. Several chains next week will offer a further read on the industry’s financial health heading into the holidays, including Target Corp., Best Buy Co. and Macy’s Inc.

In the U.S., retailers and industry consultants have largely predicted solid holiday sales amid low unemployment and rising wages that bolster consumer confidence. But the economy is growing at a slower pace than it did last year and there is “considerable uncertainty around issues including trade,” Matthew Shay, president of the National Retail Federation, said last month.

Walmart’s earnings were ahead of most Wall Street analysts’ forecasts. Morgan Stanley said the retailer’s growth in U.S. earnings before interest and taxes was the best in eight years. The company raised its guidance for the full year, as it often does when reporting third-quarter results. It now sees adjusted earnings per share rising slightly, rather than coming in flat.

Walmart shares, which have rallied about 30 % this year, ended Thursday little changed at USD 120.65 as some investors worry that online sales of non-food items aren’t growing fast enough.

Walmart has been pushing online grocery delivery as it competes with Inc. to be the most convenient shopping option for Americans. In the U.S., it now has more than 3,000 locations where customers can drive up to collect groceries and more than 1,400 locations that offer home delivery from stores.

Walmart is the country’s largest grocer, with grocery sales accounting for 56 % of its total U.S. revenue.

“Our strength is being driven by food, which is good, but we need even more progress on with general merchandise,” Mr. McMillon said. “We’re mixing the business out better to achieve better margin rates, but there is more work to do.”

Outside the U.S., Mr. McMillon said the company faces challenges in several markets. He said concerns about Brexit continue to depress consumer spending in the U.K., and Walmart has had to close its stores in Chile due to civil unrest.

International sales were USD 29 billion, or about 23 % of the quarter’s total sales. Gains abroad were led by China and Mexico, and include Flipkart, the Indian e-commerce company that Walmart purchased a year ago.

Net income was USD 3.29 billion in the quarter ended Oct. 31, 2019, compared with USD 1.71 billion in the year-earlier period when Walmart booked a large loss on its investment in Chinese e-commerce site Total revenue was USD 128 billion, up from USD 124.9 billion.

Adjusted earnings per share hit USD 1.16. On that basis, analysts were expecting earnings of USD 1.09 a share, according to Thomson Reuters.

Last month, Walmart announced the departure of Greg Foran, who led a turnaround for its U.S. stores. On Nov. 1, John Furner, formerly head of Sam’s Club, took the reins of the business, which provides the bulk of Walmart’s sales and profits.

Walmart is pushing a new grocery membership that offers unlimited delivery for a fee, in an apparent challenge to Amazon’s Prime membership program, which offers fast delivery and other perks like video streaming for a fee.

Walmart’s Delivery Unlimited programme is now available from 1400 stores, the company said Thursday. Earlier this month, Walmart also started offering a service that delivers groceries into customer’s refrigerators in three cities for USD 19.95 a month.

On Thursday, November 14, 2019, the company also reopened a Walmart store in El Paso, Texas, that was shut down following a deadly shooting on August 3. The store is one of the country’s busiest, and Walmart said the majority of its 375 workers were returning to their jobs.

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