Inflation helps Walmart gain new customers looking to take advantage of Walmart's 'value and assortment.' The retailer expects global operating income to fall 6.5% to 7.5% compared with last year. The retailer earlier projected a 9.0% to 11.0% decline.

Walmart Inc. (No. 2 in the 2021 Digital Commerce 360 Top 1000) reported a 16% year-over-year increase in U.S. ecommerce sales during Q3 of its fiscal year 2023.

The percentage growth in online sales was nearly double the retail giant’s 8.7% growth in overall (online and offline) Q3 revenue. During Q3, which ended Oct. 31, online sales grew 24% compared with two years earlier, Walmart reported without providing specific figures.

Globally, ecommerce sales penetration continues to climb, Walmart CEO Doug McMillon said during a Nov. 15 conference call.

“So far this year, 13% of our total sales as a company now start in a digital fashion,” McMillon said, according to a Seeking Alpha transcript. Online penetration for Walmart International, which encompasses Walmart’s non-U.S. operations, is 20%, he added.

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Walmart’s global advertising business grew over 30%, led by 40% growth at Walmart Connect in the U.S. Walmart Connect is a platform designed to help advertisers reach Walmart shoppers online, in the retailer’s app and stores.

Walmart adds new, high-income customers

“Customers that came to us less frequently in the past are now shopping with us more often, including higher-income customers,” McMillon said.

McMillon said inflation has helped Walmart gain customers looking to take advantage of Walmart’s “value and assortment.”

“With this in mind, we’re focusing on earning repeat business from customers who are now shopping with us more frequently than before,” McMillon said.

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To win that repeat business, McMillon said, Walmart has focused on making a “strong presentation” in the fresh groceries and apparel categories, calling them priorities. He added that Walmart hopes to retain the new shoppers by “executing pickup and delivery to create a delightful experience that saves them time. And in the case of Walmart U.S., it also means selling more Walmart+ memberships.”

Walmart+ is Walmart’s paid loyalty and rewards program.

In a note to investors, Michael Lasser, an analyst with UBS Securities LLC, said Walmart had a strong quarter. He wrote that Q3 puts Walmart in a great position going into the holiday season.

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“Overall, we think [Walmart’s] 3Q results reflect its efforts to right-size its inventory position while sustaining its sales momentum ahead of the crucial holiday spending season,” Lasser wrote.

Walmart grocery gains

Walmart also reported it boosted its market share in the U.S. grocery market but did not offer specific data. Walmart reported 75% of the growth in its grocery market share came from households exceeding $100,000 per year. The retailer also said the penetration of its private food brands grew about 130 basis points year over year.

In a note to investors, Peter Benedict, senior research analyst with financial services firm Baird, praised Walmart’s progress in the grocery market share gains. He said the progress and Walmart’s improved private-brand penetration “speak to [Walmart’s] strong positioning in today’s increasingly challenging economy.”

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Walmart’s financial guidance for the rest of the fiscal year

For the fiscal fourth quarter, Walmart’s outlook calls for:

  • Global net sales growth of about 3.0%, negatively affected by about $1.3 billion from currency fluctuations.
  • Walmart’s U.S. comparable sales, excluding fuel, to grow about 3.0%.
  • Global operating income growth of 1.0% to a decline of 1.0%.
  • An adjusted earnings per share decline of 3.0% to 5.0%.

For fiscal 2023, Walmart’s outlook calls for:

  • Global net sales growth of about 5.5% compared with the previous year.
  • Global net sales growth of about 6.5%, excluding divestitures.
  • Walmart U.S. comparable sales growth, excluding fuel, of about 5.5%.
  • A global adjusted operating income decline of 6.5% to 7.5%. That improved on the retailer’s prior guidance of a decrease of 9.0% to 11.0%.
  • A global adjusted operating income decline of 5.5% to 6.5%, excluding divestitures.
  • An adjusted earnings per share decline of 6.0% to 7.0%. Excluding divestitures, the outlook calls for adjusted earnings per share to decline 5.0% to 6.0%.

Walmart’s financial results

For the fiscal third quarter ended Oct. 31, Walmart reported:

  • U.S. net sales of $104.78 billion, up 8.5% from $96.61 billion a year earlier.
  • U.S. ecommerce growth was 16% compared with a year earlier and 24% on a two-year stack.
  • Overall, comparable sales for Walmart U.S. grew 8.2% year over year and 17.4% on a two-year stack.
  • Global net sales were $151.47 billion, up 8.8% from $139.21 billion a year earlier.
  • Global operating income was $2.66 billion, a decrease of 53.5%. That’s down from $5.79 billion a year earlier. The decline was due to charges of $3.33 billion related to opioid legal settlements.
  • Adjusted global operating income was $6.0 billion, up 3.9% from $5.79 billion.

For the nine months ended Oct. 31, Walmart reported:

  • Global net sales were $443.14 billion, up 6.5% from $416.24 billion for the comparable period a year earlier.
  • Global operating income was $14.87 billion, down 25.9% from $20.01 billion a year earlier.
  • Adjusted global operating income was $18.31 billion, down 8.7% from $20.01 billion for the year-ago period.

Percentage changes may not align exactly with dollar figures due to rounding.

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