While Wall Street handed Walmart (WMT) a lump of coal on Thursday in response to third-quarter earnings, the world's largest retailer managed to score several big wins in front of the crucial holiday shopping season.
Walmart's stock fell about 3% in early trading Thursday as total sales rose 0.7% from the prior year to $118.2 billion, missing Wall Street forecasts for $118.8 billion. Sales were clipped by $2.1 billion due to the relative strength of the U.S. dollar since the summer months. Food price deflation didn't help the company, either.
Earnings came in at 98 cents a share, beating projections for 96 cents a share. Walmart lifted its full-year earnings outlook to $4.20 to $4.35 a share from previous guidance of $4.15 to $4.35 a share.
Here are several key things Wall Street may have overlooked in Walmart's earnings report that suggest the holiday season may turn out pretty festive for the Bentonville, AR. based discounter.
Walmart has more momentum headed into holidays than its archnemesis.
Amid investments in lower merchandise prices and higher wages for store workers, Walmart's U.S. sales are on the comeback trail. Walmart U.S. notched a same-store sales increase of 1.2%, the division's ninth straight gain. Meanwhile, Target's (TGT) third-quarter same-store sales fell for the second consecutive quarter, dropping 0.2%.
The momentum this year for Walmart is a sign its initiatives to draw in spendthrift U.S. shoppers are working, and may pay big dividends during the holiday season.
Walmart's inventory is in great shape before the holidays.
The company has placed out-sized focus this year on cleaning up inventory at Walmart U.S. so that it's being as efficient as possible. Nowhere was that more on display than in the third quarter, as inventory at Walmart U.S. fell 2% from the prior year while in-stock levels -- mostly in food -- improved.
As a result of its initiatives, Walmart has entered the holiday season with reduced risk of the profit-busting markdowns that tend to happen when too much stuff is sitting unsold in the stockroom.
Walmart's online business has kicked into a higher gear.
To jump-start online sales and make inroads into Amazon's (AMZN) dominance this year, Walmart has increased the number of items available for sale online, improved the shopping experience, and started new services such as online grocery ordering. In the third quarter alone, Walmart added 8 million new items to buy on its website. The company's online grocery ordering option is now available in 100 U.S. markets, touching 600 stores.
The efforts have started to bear fruit for Walmart, which is great news ahead of another holiday season that will see heavy online shopping demand.
Walmart said e-commerce sales, excluding the effect of the strong dollar, increased by 20.6% in the third quarter with even stronger growth in the United States. In the second quarter, sales on this same basis rose 11.8%.