(Bloomberg Opinion) -- The uncertainties for Walmart Inc. were piling up in the third quarter, both external (tariff whiplash, recession fears) and internal (a management shuffle in the U.S.). Judging by its Thursday earnings report, though, the big-box giant was unruffled by all the change.
Walmart boosted its full-year earnings outlook and reported that U.S. comparable sales in the latest quarter rose 3.2% from a year earlier, slightly ahead of analysts’ estimates.
The increase in comparable sales reflects both growth in transactions, a proxy for traffic, as well as ticket prices, which can reflect consumers buying pricier goods or filling their baskets with more items. The company also recorded a 41% increase in e-commerce sales from a year earlier, putting its full-year estimate for online sales growth of about 35% within easier reach.
It all adds up to a business-as-usual quarter for a company that has now recorded 21 straight quarters of comparable sales growth in the U.S. Walmart’s growth has been so steady, in fact — and its components so consistent — that there is little doubt that the retailing giant can hold its own in its showdown with Amazon.com Inc.
The key to Walmart’s strategy and growth potential is its grocery department. This division, which accounts for more than half of U.S. sales, recorded “mid-single digit” comparable sales growth in the quarter, easily outpacing the low-single digit growth that has been routine at supermarket giant Kroger Co.
Continued momentum in grocery is Walmart’s best way of playing offense against Amazon at a time when the e-commerce behemoth’s strategy for the category looks increasingly incoherent. After plunking down $13.7 billion for Whole Foods Market in 2017, Amazon confirmed this week it is building an entirely different brick-and-mortar grocery chain. When Amazon talked up price cuts at Whole Foods, it seemed like it was trying to broaden the grocery chain’s appeal. Why does it now need a second chain to reach more shoppers? And how and why do these endeavors coexist with Amazon Fresh, its e-commerce delivery service?
Meanwhile, Walmart’s strategy is clearly defined and appears to be effective. It has rolled out click-and-collect grocery shopping at more than 3,000 stores and offers grocery delivery from 1,400. The company continues to work not just on logistics, but on the food itself: Executives said improvements to fresh food, including in its bakery and meat department, helped power its market share gains in the quarter. It has spiffed up its private-label food offering in recent years, and said sales continued to be “strong” in those products.
None of this is to say that Walmart’s future in the food business is assured. Now that its pickup service has reached so many stores, it’s going to get more challenging to add new customers. Grocery delivery is not as widely available yet, and will require Walmart to nail some new logistical gymnastics. Meanwhile, Bloomberg News has reported on the tension between Walmart’s digital and brick-and-mortar teams, which if left unaddressed could undermine the collaboration and innovation so crucial to Walmart’s growth.
For now, however, Walmart looks to be in solid shape, with food as its primary fuel for success.
To contact the author of this story: Sarah Halzack at email@example.com
To contact the editor responsible for this story: Michael Newman at firstname.lastname@example.org
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.
For more articles like this, please visit us at bloomberg.com/opinion
©2019 Bloomberg L.P.