We review Walmart's third quarter performance and the outlook for the business as it prepares for the holiday trading period.
Walmart's key numbers
- Walmart's total revenue in Q3 increased by 5.2% to $134.7bn
- Operating income increased 22.5% to $5.8bn
- Sales in its US stores increased by 6.2% to $88.4bn and by 8.3% to $15.8bn at Sam’s Club
- US comp store sales increased by 6.4%, with average ticket up 24.0% while transactions fell 14.2%
- Sam’s Club comp sales were up 11.1% (ex-fuel), with ecommerce sales up 41%
- International net sales increased by 1.3% to $29.6bn, up 5.0% on a constant currency basis
- US ecommerce sales increased 79%
US: expecting most new consumer behaviours to persist beyond the pandemic
This was another strong performance from Walmart as it benefitted from the pandemic tailwinds, despite softer back-to-school sales and lower levels of government financial support. It continues to see shoppers adapting their behaviours, consolidating their trips. Pickup and delivery services continue to experience record high sales volumes, with the retailer estimating that the pandemic accelerated the shift to ecommerce and digital by two to three years. It expects most of the behaviour changes to persist beyond the pandemic. To support the growth in ecommerce, 2,500 stores have the capability to fulfil online orders, reliving pressures on its fulfillment centres. During the quarter, it significantly reduced ecommerce operating losses, supported in part by triple-digit growth in marketplace sales.
US: customers seeking normalcy through the holiday season
Heading into the holiday season, it is adapting its approach to support families who want to decorate, celebrate and enjoy food and gifts, seeking some element of normalcy. Its holiday events are being stretched over a longer period, as it remains vigilant to the threat of the pandemic as cases continue to rise in the US. Shoppers continue to stock-up on key products, although Walmart is better positioned to support than in the earlier phase of the pandemic. Recognising the increase in eating meals at home, recently it launched the Walmart Cookshop, a free interactive video series featuring celebrity chefs helping customers to create 250 different recipes.
International: Canada leading growth in major markets
Walmart delivered positive comparable (comp) sales in eight out of 10 key markets, led by Flipkart in India, Canada and Mexico. Canada delivered a particularly strong performance with net sales and comp sales up 7.7%. Ecommerce sales in the country were up 177%. In Mexico, comp sales increased up 5.4%, with ecommerce sales up 201%. In China, strong sales at Sam’s Club were offset by softer traffic in hypermarkets, leading to a 0.4% increase in comp sales. Ecommerce sales in China increased 63%. In the UK, comp sales increased 2.7% with ecommerce sales up 72%. Recently the retailer has undertaken several actions to reshape its international portfolio, enabling it to invest in key markets.
Sam’s Club: strong membership growth
Comparable stores sales at Sam’s Club strengthened through the quarter, with contribution from increased transactions (+6.8%) and average ticket (+4.0%). The retailer also saw strong growth in membership income, up 10.4%, with improvement in renewal rates and the penetration of Plus members. New member count increased by approximately 28%, reflecting the continued appeal of the offer following investments in fresh foods and private label.
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