Walmart beats profit estimates on buoyant online sales

Walmart Inc. posted a bigger-than-expected increase in quarterly same-store sales and beat expectations for profit on Tuesday amid a surge in its online business with higher spending on electronics, sporting goods and groceries.

Sales at U.S. stores open at least a year rose 6.4 per cent, excluding fuel, in the third quarter ended Oct. 31. Analysts had estimated an increase of 4.16 per cent, according to IBES data from Refinitiv.

Walmart U.S. eCommerce sales grew 79 per cent with strong results across all channels and helped boost same-store sales and profit margins.

“Big-box retailers could be net beneficiaries from the resurgence of COVID-19 cases due to their e-commerce exposure,” CFRA analyst Garrett Nelson said.

The surge in demand for essentials at Walmart seen at the peak of the coronavirus lockdowns has carried into the second half of the year, with consumers relying on its same-day delivery options and store pickup services to buy everything from groceries to sneakers.

“We think these new customer behaviours will largely persist and we're well positioned to serve customers with the value and experience they're looking for,” chief executive Doug McMillon said in a statement.

The COVID-19 pandemic has also forced retailers to drastically rethink how they do business during the key holiday season, with many big retailers including Walmart, Kohl's, Target, and Best Buy moving their promotions to as early as October.

An early start to the holiday season has helped Bentonville, Arkansas-based Walmart “gives customers the opportunity to come to stores when they aren't as crowded as they typically would be on a one-day Black Friday type of event,” chief financial officer Brett Biggs told Reuters on Tuesday.

Despite a slow start to the back-to-school shopping season, which typically begins in July, Walmart said it benefited later in the quarter.

Walmart said on Tuesday it incurred about US$600 million in additional COVID-19 expenses that included higher wages for warehouse workers and bonuses for store employees, as well as spending more on cleaning facilities. The retailer had recorded about US$1.5 billion in such expenses in the prior quarter.

Executives said on a call with investors they expected COVID-related costs to continue for “some time, along with some general global uncertainties.”

Shares of the company were down 1.8 per cent at US$149.75 in premarket trading. They have risen 28 per cent this year.

Operating income jumped 22.5 per cent to US$5.79 billion in the third quarter, while Walmart reported adjusted earnings per share of US$1.34 that topped expectations for US$1.18.

Total revenue rose 5.2 per cent to US$134.71 billion, beating estimates for US$132.23 billion.

Among increased investments in e-commerce, the retailer in September launched its subscription service Walmart Plus, touted as a rival to Amazon. com's Prime subscription, which includes perks like free shipping and streaming services.

Walmart Plus membership costs US$98 per year and offers services such as unlimited free delivery, fuel discounts and no checkout lines.