Walmart’s Q3 FY22 Highlights
- Total revenue up 4.3% to $140.53 billion.
- Walmart U.S. e-commerce sales grew 8% for the quarter and 87% on a two-year stack.
- Walmart’s U.S. comparable sales (excluding fuel) grew 9.2% in the quarter.
- Sam’s Club’s comp sales increased 13.9%, and 25% on a two-year stack. The club retailer’s e-commerce sales grew 32%. Membership income increased 11.3%, the fifth consecutive quarter of double-digit growth.
- Consolidated gross profit rate decreased 42 basis points, due to increased supply chain costs, a higher mix of lower margin fuel business in the U.S. and a shifting international format mix.
- Walmart U.S. inventory up 11.5% ahead of holidays
“The steps taken to mitigate transit and port delays have positioned us well, including adding extra lead time to orders, chartering vessels for Walmart goods, rerouting deliveries to less congested ports, and expanding overnight hours at key U.S. ports,” said Brett Biggs, EVP and CFO.
The efforts are paying off as Black Friday approches. “Positive news for holiday shoppers in that the large U.S. retailer reported an increase in inventory of 11.5% as supply remains more of a concern than the reduced discounts likely to be on offer this year,” analyst Richard Snow of DailyFX.com, tells RIS.
“Mastercard Spendingpulse data suggests that U.S. retail sales over the Thanksgiving weekend alone will rise 10% from last year and by over 12% from the same week in 2019, as pent-up consumer demand continues into the start of the holiday period. Positive sales numbers will only show up in the earnings data for Q4 which is likely to be strong as the holiday period brings the year to a close.”
Walmart is seeing inflationary cost pressures in some areas, Biggs noted on the call, but its merchants remain “laser-focused” on taking steps to mitigate supply chain congestion, while “working with suppliers and monitoring price sketch to manage margins appropriately.” Lower markdowns and advertising revenue have helped offset cost pressures, he said.
“As Walmart has become one of the largest retailers in the U.S., it will need to ensure they have enough products for their consumers to complete holiday shopping,” Eli Finkelshteyn, CEO and founder of Constructor, tells RIS. “With its e-commerce site, it can encourage sales of products in the search and discovery process based on inventory availability both in stores and in warehouses, to decrease the likelihood of anything running out. With a comprehensive, thorough search and discovery strategy that is aligned with the company's goals, retailers can manipulate their e-commerce platforms to show high stock items that match a customer’s interest over low in-stock items that they may have initially thought they wanted.”
Walmart will likely double-down on tactics such as this as it approaches the holidays. The retailer is using an machine learning and artificial intelligence to do a number of different things, Furner said, including predictive baskets, smart substitution, and its AI-empowered in-stock assistant. Walmart's U.S. e-commerce sales grew 8% for the quarter and 87% on a two-year stack.
To boost digital engagement, the retailer is offering shoppers several connected commerce experiences this holiday season through its “Joy. Fully” campaign, including tapping facial-recognition technology, shoppable livestreaming, and shoppable experiences on Pinterest.
“Despite recent supply chain challenges, consumers are continuing to embrace online shopping habits and Walmart’s Q3 success is a prime example,” Brent Ramos, director of product, search at Adswerve, tells RIS. “From shoppable live streams this holiday season to sponsored recipes on social media platforms and upgrading its online holiday delivery services, Walmart has been able to drive a constant stream of traffic and engagement to its site and app.
“Earlier this quarter, the retailer also launched Walmart Luminate, a new system that analyzes data from Walmart’s massive hub of consumers and offers insights into audience behavior, perception and channel performance for the various brands at Walmart. It is this type of consumer-centric engagement and alignment with respecting data privacy that has sparked greater brand awareness for Walmart, positive Q3 results and a bright outlook for the end of 2021.”
Walmart announced it expects Walmart U.S. Q4 comp sales of around 5%. For the full year, it expects earnings per share of $5.00 and adjusted earnings per share of $6.40, up from its previous guidance of $6.20 to $6.35, and U.S. comp sales growth (excluding fuel) of 6%.
“The business model's changing, the digital transformation's underway, this is a different company than it was, and we've got a lot of runways in front of us,” said McMillon.