The retail giant has rapidly expanded its online grocery service and in recent weeks debuted a new offering in three cities where employees put the food right into customers’ fridges.

(Bloomberg)—If a quick spin around a struggling American mall paints a gloomy picture, a detour over to Walmart Inc. presents a much brighter scene.

Brushing off the general malaise weighing down Gap Inc. (No. 28 in the Internet Retailer 2019 Top 1000), Macy’s Inc. (No. 5) and other well-known merchants, Walmart (No. 3) entered the crucial holiday season on a high note, posting solid third-quarter sales and raising its full-year outlook again.

Walmart’s web sales in the U.S. rose 41%, ahead of its expected growth rate for the full year. It has rapidly expanded its online grocery service and in recent weeks debuted a new offering in three cities where employees put the food right into customers’ fridges. Nearly one in four Americans who buy groceries online each month place at least one of those orders with Walmart, according to researcher Brick Meets Click.

Profitability has been a concern on the dot-com side, though, and Biggs said in prepared remarks that the company needs to sell more general merchandise, which delivers better margins than bread and bananas.

Comparable sales excluding gas for Walmart stores in the U.S. rose 3.2% in the period, beating analysts’ 3.1% growth estimate and marking the 21st straight gain. Both the number of customers and the size of their average orders were up, fueling the growth.

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“It was a really good third quarter,” chief financial officer Brett Biggs said in an interview, adding that he’s “pleased” with how shoppers are responding so far to the rollout of early holiday deals. Walmart now sees full-year adjusted earnings per share increasing slightly compared to last year, after saying in August either a slight decrease or slight increase was possible.

This is the second time this year Walmart has upgraded its outlook. The rosier view contrasts with more downbeat expectations from retailers like Macy’s, which slashed its profit guidance in August. Last week, apparel staple Gap fired its top executive following disappointing third-quarter performance and a failed turnaround bid. Earlier this month, Moody’s cut its expectations for the entire U.S. retail sector, citing “intense competition in the fight for market share.”

Meanwhile, Walmart—buoyed by its market-leading grocery business and big investments to improve ecommerce—has largely avoided the turmoil that’s afflicted many mainstream merchants over the past two years. Investors have noticed, and Thursday sent the shares up as much as 3.6% to a record high.

Walmart “is holding its own against encroachment from Amazon and others and is leveraging its store assets, its primary advantage, with digital order pick-up towers and drive-through grocery lanes,” John Zolidis, president of Quo Vadis Capital, said in a research note. Those moves, plus a bigger push into same-day delivery, are helping it pick up “share from traditional retailer competitors that are closing doors or are too late in the game to transform their business models.”

“Walmart continues to position itself near the very top of global retail by any measure, and will continue to get stronger as time goes on, increasing the pressure on the rest of global retail,” Charlie O’Shea, an analyst at Moody’s, said in a note.

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‘Slower’ progress

“Walmart needs to improve its position in non-food,” Neil Saunders, an analyst at GlobalData Retail, said in a note. “Progress is slower than Walmart would like.” On a call with reporters, ecommerce chief Marc Lore said the company is trying to improve sales of home decor and apparel, like its recent re-launch of the Scoop fashion brand.

Sam’s Club, the company’s warehouse division that accounts for about 11% of its revenue, was one weaker spot. Comparable sales there rose only 0.6%, just one-third the pace analysts surveyed by Consensus Metrix had been expecting. Performance there was “surprisingly weak,” RBC Capital Markets analyst Scot Ciccarelli said.

The chain is still without a leader a month after Sam’s CEO John Furner was tapped to replace Greg Foran as head of Walmart’s U.S. stores division. Biggs provided no update on the search Thursday, a day that Walmart dedicated to re-opening a store in El Paso where 22 people were killed in a mass shooting in August. The massacre prompted Walmart to discontinue selling handgun ammunition and other types of bullets in its stores.

“Today is a very important day as we begin serving the community again in El Paso,” Furner said.

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