Walmart earnings top expectations as customers’ new shopping habits send e-commerce sales soaring 79%

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Customers shop at a Walmart store on May 19, 2020 in Chicago, Illinois.
Scott Olson | Getty Images

Walmart reported third-quarter earnings on Tuesday that topped Wall Street’s expectations as customers continued to shop online and sent U.S. e-commerce sales soaring by 79%.

The discounter said customers are embracing the new ways of shopping they adopted during the global coronavirus health crisis. As the holiday shopping season begins, instead of browsing store aisles, more of them are shipping purchases to their homes, getting groceries dropped off at their doors or picking up online purchases by the curbside. 

Walmart did not provide an outlook, but the company’s CEO, Doug McMillon, said the popularity of the online shopping services will not fade away. 

“We’re convinced that most of the behavior change will persist beyond the pandemic and that our combination of strong stores and emerging digital capabilities will be a winning formula,” he told investors on an earnings call. “Customers will want to be served in a variety of ways and we’re positioned to save them money, provide the variety of product choices they’re looking for, and deliver the experience they choose in the moment.”

And, he added, the retailer had a strong quarter, despite “an unusual and softer back-to-school season and less benefit from government stimulus spending versus the first half of the year.”

He said the rising number of Covid-19 cases across the country “reminds us we must be vigilant” and urged elected officials to work together to help small businesses.

Walmart shares closed Tuesday down 2% to $149.37. Its stock has gained nearly 26% so far this year, bringing Walmart’s market value to $423.3 billion. Shares touched an all-time high of $153.40 on Monday.

Here’s what the company reported for the fiscal third quarter ended Oct. 31:

  • Earnings per share: $1.34, adjusted vs. $1.18 expected, according to Refinitiv’s consensus estimates
  • Revenue: $134.7 billion vs. $132.2 billion expected by Refinitiv estimates
  • U.S. same-store sales: up 6.4% vs. gain of 3.9% expected by StreetAccount survey

In the quarter, Walmart reported net income rose to $5.14 billion, or $1.80 per share, from $3.29 billion, or $1.15 a share, a year earlier. Excluding items, the company earned $1.34 per share. Analysts were expecting Walmart would earn $1.18 per share, according to Refinitiv.

Total revenue grew by 5.2% to $134.7 billion from $128.0 billion a year earlier, exceeding Wall Street’s expectations of $132.2 billion.

Walmart’s same-store sales in the U.S. grew by 6.4%, higher than the increase of 3.9% expected by StreetAccount survey.

Walmart subsidiary, Sam’s Club, had a strong quarter, too. The membership warehouse club’s same-store sales increased about 11%, excluding fuel, and its e-commerce sales jumped 41%.

The retailer’s international business grew, but at a slower rate. Net sales in the third quarter were $29.6 billion, an increase of 1.3%. Excluding changes in currency rates, net sales would have been $30.6 billion, or a rise of 5%. Flipkart, an Indian e-commerce retailer that Walmart acquired two years ago, had a record number of monthly active customers.

The company said Covid-19 added about $600 million in incremental expenses in the third quarter, but were partially offset by a noncash impairment charge in the third quarter of last year.

‘Three to five years’ e-commerce growth

Walmart has been one of the beneficiaries of stay-at-home trends during the pandemic — a trend that continued in the most recent quarter, even without a boost from government stimulus dollars. Since the spring, Americans have turned to its stores and website for groceries, cleaning supplies and items to pass the time, from puzzles to bicycles. 

The company has hired over half a million new employees this year.

Walmart Chief Financial Officer Brett Biggs said the shift in purchasing patterns at the start of the pandemic amounted to “three to five years of acceleration in e-commerce, really in a period of weeks and months.”

But, he added, “people are still going to want to stop and shop at stores longer term so we like the combination of those assets.”

In the coming months, Walmart will face new challenges. Coronavirus cases and hospitalizations are rising across the country during the holiday shopping season. Starting Saturday, Walmart said it would resume counting and restricting the number of customers in the store to make sure they don’t exceed capacity limits. Some grocers, including Kroger, Wegmans and Publix, have reinstated purchasing limits on toilet paper, disinfecting spray and hand sanitizer.

Spreading out Black Friday sales

Walmart’s stores will be closed on Thanksgiving, a day that’s been the kickoff to the holiday shopping season in previous years. Like other retailers, the discounter began holiday sales early because of the pandemic and has spread out its deals. It split up Black Friday into multiple store and online events instead of having a day of doorbusters.

“It just gives people more of an opportunity to shop throughout the season,” Biggs said. “It’s not so focused on one day.”

He said that helps spread out orders for Walmart, which must pick, pack and ship many of those purchases.

“Think about how you supply stores. It certainly takes pressure off of a system that’s typically geared toward a few days or a Black Friday weekend. All of that I think is a positive for us and for customers.”

Customers may celebrate differently, but McMillon said he expects they will still be enthusiastic about the holidays.

“While many family gatherings may be smaller, we do believe families want to decorate, celebrate, and enjoy food and gifts,” he said on the earnings call. “They want a sense of normalcy, and our traditions help bring some joy and comfort to this difficult year.”

Read the complete release here.

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