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Walmart Delivers Another Quarter of Outstanding Growth

GuruFocus.com
·2 min read

- By Mayank Marwah

Walmart Inc. (NYSE:WMT) released its third-quarter earnings results before the opening bell on Nov. 17. The retail giant posted impressive earnings and revenue, beating Wall Street's projections.

The quarter in a snapshot

Walmart recorded net income of $5.14 billion, translating to GAAP earnings of $1.80 per share. The company reported adjusted earnings of $1.34, topping analysts' estimates of $1.18 per share. Revenue grew 5.2% year over year to $134.7 billion, which surpassed expectations of $132.2 billion.


Same-store sales grew 6.4% on the back of strong grocery sales. This was also more than the 3.9% growth analysts were anticipating. Walmart's subsidiary, Sam's Club, experienced comps growth of 11.1%, barring fuel sales.

While the number of transactions plunged 14.2%, the average ticket price rose 24%. Due to the pandemic and related stay-at-home orders, customers consolidated store shopping trips with larger average baskets and shifted more purchases to online, the company said.

E-commerce sales surged 79% in the U.S., fuelled by online grocery pickup and delivery services as well as robust grocery sales. The coronavirus pandemic and the resulting lockdowns boosted the company's digital performance. Chief Financial Officer Brett Biggs said the shift in consumers' purchase pattern from offline mode to online mode over the course of the pandemic amounted to "three to five years of acceleration in e-commerce, really in a period of weeks and months."

Black Friday sales

Walmart started rolling out its holiday sales in early October like most retailers due to the Covid-19 pandemic. Sales and promotions related to Black Friday will not be restricted to a single day as in the past, but are being spread across multiple stores and online events for several days in order to avoid huge gatherings.

"It just gives people more of an opportunity to shop throughout the season," Biggs said. "It's not so focused on one day."

Walmart to sell its majority stake in Seiyu

Walmart has agreed to sell its 85% stake in Seiyu, a Japanese supermarket chain, to U.S. investment firm KKR & Co. Inc. (NYSE:KKR) and Japanese e-commerce company Rakuten (TSE:4755). The U.S. retailer will retain a 15% stake in the company. The deal is valued at approximately $1.6 billion and the transaction is expected to close in the first quarter of 2021, subject to regulatory approval.

Walmart's near exit from Japan reflects its intension of focusing on China and India, which are high-growth markets, and the U.S., where it derives roughly 70% of consolidated revenue.

Guidance

The company did not provide any guidance figures for future earnings and revenue.

Disclosure: I do not hold any positions in the stocks mentioned.

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This article first appeared on GuruFocus.