Walmart Forecasting A Big Finish For 2018

Walmart is apparently expecting the holiday season to be merry and bright in 2018, with raised expectations for the full year following a third quarter with stronger-than-expected earnings.

As was the case in the previous quarter, eCommerce sales and grocery were big winners for Walmart, and same-store sales logged their 16th consecutive quarter of growth. Basket sizes were also reported as gaining in size, though currency headwinds took their toll in light of recent overseas investments by the retail giant, meaning revenue came in south of analyst estimates.

“We have momentum in the business as we execute our plan and benefit from a favorable economic environment in the U.S.,” CEO Doug McMillon said in a statement post-earnings release.

Walmart’s net income came in at $1.71 billion, or 58 cents a share, compared with $1.75 billion, or 58 cents per share, a year ago. Earnings came in at $1.08 per share, 7 cents ahead of the $1.01 analysts had been looking for. Revenue was up 1.4 percent to $124.89 billion from $123.18 billion last year, but analysts were expecting $125.55 billion. Minus currency headwinds, revenue was $126.1 billion.

Same-store sales, the most-watched metric in retail, were up again by 3.4 percent, better than the 3.1 percent analysts were forecasting. Traffic in stores was up 1.2 percent during the quarter, according to Walmart, while basket size picked up 2.2 percent. Grocery was a major driver of that in-store traffic. The firm also announced that Walmart now has a grocery pick-up option at roughly 2,100 stores across the U.S., and grocery delivery at about 600 locations.

Digital sales also continued to grow, up 43 percent and well on pace for Walmart to achieve its full year goal of 40 percent eCommerce growth.

Walmart’s shares, despite strong numbers, were still trading down post-earnings. In addition to the revenue miss, there is also a rising concern that in a cooled economic environment, Walmart will not be able to sustain the aggressive pace of growth it has pushed for over the last several years.

UBS Analyst Michael Lasser told CNBC that Walmart may be somewhat more insulated from an economic slowdown than the average chain.

“We’re probably about six months away from a slower consumer spending environment, as the boost from the tax reform starts to fade,” he noted. “There’s a move away from some of the retailers that were disproportionately benefiting from that, to more safe-haven, defensive-type retailers like Walmart.”

In the more immediate future, Walmart is prepping for holiday 2018 – particularly online and in the digital part of its business, where it has been dramatically expanding its product assortment.

For the full year, Walmart now expects same-store sales in the U.S. to rise “at least” 3 percent, compared with a previous outlook of “about” 3 percent. It says adjusted earnings per share will fall within a range of $4.75 to $4.85, up from a prior range of $4.65 to $4.80.