Walmart (WMT, Financial) is one of the biggest retailers, in terms of revenue, and has made a large number of steps to increase its business. It is indeed one of those retailers, which provides stiff competition to the online giant Amazon (AMZN, Financial). However, factors such as lower consumer spending and unwillingness of middle class people to spend have been affecting its results. After missing on the estimates from quite some time, Walmart's third-quarter results came as a relief to its investors. The numbers were ahead of the Street's expectations, sending its share price higher.
The quarter in detail
The top line stood at $119 billion, an increase of 3% over last year and higher than the analysts' estimate of $118.35 billion. After a decline in same store sales in the last few quarters, the U.S. comp sales jumped 0.5% during the quarter. Same store sales growth is a very important metric in the retail industry and has been improving for the company.
Further, comp sales in the grocery and the entertainment segment were flat over last year. One of the brightest spots during the quarter was the neighborhood market segment. This segment performed well, as indicated by comp sales of 5.5%. This new format store is gaining a lot of popularity since it is located in the nearby area which is easily accessible to customers. Also, these stores are smaller in size and are therefore weigh less on the cost structure.
Even the overseas business rose 1.7%, driven by the launch of new products and services in markets such as Mexico and China. In addition, the Sam's Club segment climbed 2.3% to $14.4 billion as comp sales increased 0.4%. However, earnings were flat at $1.15 per share, slightly higher than the analysts' expectations.
Positive cues
The e-commerce segment too is one of the star performers as the retailer expands this business to provide stiff competition to its peers. Online sales grew 21% during the quarter, which is remarkable. Walmart is taking measures to combat competition from Amazon. It has made its prices competitive to that of the online giant in order to attract more customers.
Moreover, the retailer plans to offer attractive deals on selected items during the holiday period. Also, upcoming events such as Black Friday, thanksgiving should benefit the company. These are the biggest shopping days in the U.S., and retailers want to make the most of it. Further, lower petrol prices are expected to boost consumer spending in the coming months. Thus, the company is optimistic about the upcoming quarter as well as its future prospects.
However, Japan is a matter of concern. The region is not performing well and plans to close 30 underperforming stores in the months to come. The company has also cut its earnings forecast for the year as it expects to ramp up its spending on promotions. For instance, it plans to offer free shipping on top 100 items during the holiday season. Also, it will cut prices on 20,000 items, which should draw customer attention.
Ending thoughts
It is clear that Walmart is well-equipped for the fall season. It is the best period for any retailer, and Walmart seems to be making the most of it through effective measures to lure customers. Further, it is experiencing growth across all the segments, including the most hyped e-commerce business. Considering all these factors, this big box retailer should be considered for your portfolio.
