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Walmart continues sales momentum in third quarter

Robust e-commerce growth helps drive 6.6% U.S. comp-sales gain

Russell Redman

November 17, 2020

6 Min Read
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“Our merchant and replenishment teams are working hard to make sure we have products available for our customers," Walmart CEO Doug McMillon told analysts in a conference call.Walmart

Walmart posted solid sales gains and topped Wall Street’s high-end earnings forecast for its fiscal 2021 third quarter as it continued to adapt to changing consumer behavior and operational challenges presented by the COVID-19 crisis.

For the quarter ended Oct. 31, Walmart totaled revenue of $134.61 billion, up 5.2% from  $127.99 billion a year earlier. Excluding the impact of foreign exchange, revenue rose 6.1% to $135.8 billion, the company said Tuesday.

At Walmart U.S., third-quarter net sales climbed 6.2% to $88.35 billion from $83.19 billion a year ago. Comparable sales grew 6.3% year over year (6.4% excluding fuel), with the average ticket size up 24% and the number of transactions down 14.2%.

President and CEO Doug McMillon noted that Walmart drove growth despite an “unusual and softer” back-to-school season and less benefit from government stimulus spending versus the first half of the year

“Walmart U.S. had another strong quarter. Comp sales increased 6.4%, and we significantly reduced operating losses in e-commerce,” McMillon told analysts in a conference call on Tuesday. “Consistent with the second quarter, we saw customers consolidate shopping trips with larger baskets and fewer transactions. Comp sales accelerated from the beginning of the quarter, helped by food, consumables, and health and wellness.”

Related:Walmart to pilot all-electric self-driving delivery in 2021

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Walmart U.S. e-commerce sales jumped 79%, with strong results across pickup, delivery and direct-to-home channels.

E-commerce sales at Walmart U.S. surged 79% versus a year ago, with the company  citing strong results across digital channels, and contributed about 570 basis points to comp-sales growth.

“Growth was strong in pickup and delivery as well as direct-to-home, with the highest growth coming from [Walmart] Marketplace,” McMillon said. “We also launched Walmart , and we’re excited to have that important piece of the puzzle in place. We launched it with an initial set of benefits that we know are important to our customers. Over time, we’ll evaluate the program against our broader set of assets with the aim of improving the value proposition and deepening our relationship with customers, including earning a greater share of wallet.”

Pandemic-related supply issues persisted in the third quarter, but Walmart has shown flexibility in leveraging its brick-and-mortar assets and manpower to meet spikes in demand, according to McMillon.

“Our merchant and replenishment teams are working hard to make sure we have products available for our customers, and stock levels have improved from Q2 but were still below where we want to be,” he said in the call. “The team is being flexible when it comes to meeting demand. For example, we’ve turned on nearly 2,500 stores to fulfill online orders. We can quickly flex this number as the holiday season progresses to help relieve pressure on our e-commerce fulfillment centers, if necessary.”

Related:Walmart designates four stores as ‘test centers’ for ‘new era of retail’

Sam’s Club turned in net sales of $15.85 billion in the third quarter, up 8.3% from $14.63 billion in the prior-year period. Comp sales rose 7.9% overall and were up 11.1% excluding fuel. Transactions grew 6.8% and the average basket was up 4%, compared with a 5.1% decline in the year-ago quarter. E-commerce sales increased 41% and contributed 230 basis points to the warehouse club chain’s comp-sales growth. Meanwhile, membership income gained 10.4%, and member signups and renewal rates were strong, with renewals for Plus membership up 350 basis points.

“At Sam’s Club, strong comp sales of 15.3% minus fuel and tobacco included a good balance of increased ticket and transactions. Great items drive the club business, and our merchandising offer is compelling. Our strength in fresh food and the uniqueness of Member’s Mark continue to make it special to be a member,” said McMillon.

“Consistent with the growing popularity of a contactless shopping experience, Scan & Go penetration is up more than 600 basis points,” he added, “and curbside delivery has been well-received by members and is growing well above our overall comp sales.”

Overall U.S. comparable sales, including Walmart U.S. and Sam’s Club, were up 6.6% in the third quarter, with the increase at 7.1% without fuel.

Walmart International saw third-quarter net sales edge up 1.3% to $29.55 billion from $29.17 billion a year earlier. In constant currency, net sales rose 5% to $30.62 billion. Walmart noted strong performances by Walmart Canada, Walmart Mexico (Walmex) and Flipkart in India.

At the bottom line, Walmart reported consolidated net income (attributable to the company) of $5.14 billion, or $1.80 per diluted share, for the fiscal 2021 third quarter, compared with $3.29 billion, or $1.15 per diluted share, a year ago. Excluding a loss on the sale of Walmart Argentina and the net impact of unrealized equity investment gains, adjusted net earnings per share were $1.34, well over the top end of Wall Street’s projection.

Analysts, on average had forecast adjusted EPS of $1.18, with estimates ranging from a low of $1.06 to a high of $1.26, according to Refinitiv/Thomson Reuters.

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Walmart said there will be no letup in its COVID-19 safety and operational measures, as coronavirus cases continue to mount nationwide.

In a research note on Tuesday, Jefferies analyst Stephanie Wissink said Walmart U.S. and Sam’s Club comp-sales growth exceeded both Jefferies’ and Wall Street’s consensus estimates, while e-commerce sales results were in line with projections, with Walmart U.S. pickup and delivery sales growing by triple digits. She noted that although Walmart U.S. basket growth topped Jefferies’ expectations, the decline in transactions exceed her team’s forecast and grocery comp-sales growth of mid-single digits remained below the industry average.

“With the country re-entering various levels of lockdown, and Walmart having already announced capacity limits, we see a continuation of fewer trips with bigger baskets and a shift to e-com persisting into the fourth quarter,” Wissink wrote.

In the call with analysts, McMillon noted that Walmart’s COVID-19 safety and operational measures will continue. He also called for more cooperation among public officials at all levels and extended congratulations to former Vice President Joe Biden on becoming the president-elect.

“The recent rise in COVID cases throughout the country reminds us we must remain vigilant. As we’ve done since the beginning of the outbreak, we’ll continue being disciplined about the safety protocols throughout our stores, clubs, distribution and fulfillment centers. We’re reinforcing our messaging to customers, members and associates regarding wearing face coverings, social distancing and other safety measures,” McMillon said.

“While the health and safety of our customers, members and associates is our first priority, we realize the increasing cases will put more pressure on small businesses that have been heavily impacted by the pandemic,” he added. “As various governments around the country tighten up to help keep people healthy, it will be imperative that elected officials in Washington work together to deliver the help so many small businesses need to get through this next phase of the pandemic.”

For our most up-to-date coverage, visit the coronavirus homepage.

About the Author

Russell Redman

Senior Editor
Supermarket News

Russell Redman has served as senior editor at Supermarket News since April 2018, his second tour with the publication. In his current role, he handles daily news coverage for the SN website and contributes news and features for the print magazine, as well as participates in special projects, podcasts and webinars and attends industry events. Russ joined SN from Racher Press Inc.’s Chain Drug Review and Mass Market Retailers magazines, where he served as desk/online editor for more than nine years, covering the food/drug/mass retail sector. 

Russell Redman’s more than 30 years of experience in journalism span a range of editorial manager, editor, reporter/writer and digital roles at a variety of publications and websites covering a breadth of industries, including retailing, pharmacy/health care, IT, digital home, financial technology, financial services, real estate/commercial property, pro audio/video and film. He started his career in 1989 as a local news reporter and editor, covering community news and politics in Long Island, N.Y. His background also includes an earlier stint at Supermarket News as center store editor and then financial editor in the mid-1990s. Russ holds a B.A. in journalism (minor in political science) from Hofstra University, where he also earned a certificate in digital/social media marketing in November 2016.

Russell Redman’s experience:

Supermarket News - Informa
Senior Editor 
April 2018 - present

Chain Drug Review/Mass Market Retailers - Racher Press
Desk/Online Editor 
Sept. 2008 - March 2018

CRN magazine - CMP Media
Managing Editor
May 2000 - June 2007

Bank Systems & Technology - Miller Freeman
Executive Editor/Managing Editor
Dec. 1996 - May 2000

Supermarket News - Fairchild Publications
Financial Editor/Associate Editor
April 1995 - Dec. 1996 

Shopping Centers Today Magazine - ICSC 
Desk Editor/Assistant Editor
Dec. 1992 - April 1995

Testa Communications
Assistant Editor/Contributing Editor (Music & Sound Retailer, Post, Producer, Sound & Communications and DJ Times magazines)
Jan. 1991 - Dec. 1992 

American Banker/Bond Buyer
Copy Editor
Oct. 1990 - Jan. 1991 

This Week newspaper - Chanry Communications
Reporter/Editor
May 1989 - July 1990

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