Walmart Hikes Earnings Guidance

Walmart revises earnings guidance higher ahead of holidays. Read more here!

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Walmart reported earnings that topped analysts’ expectations and increased its guidance for the whole year heading into the holiday season.

Earnings were driven by the e-commerce sales, as the company continues to gobble up online brands to compete with Amazon in categories like apparel and home goods, while also scaling its grocery business.

Comparable sales also increased for their 16th consecutive quarter, as existing Walmart shoppers flocked to its stores more frequently and added more to their baskets.

The big box retailer’s revenue was a shade lower than analysts’ estimates, however. This is because of currency headwinds, which have blown revenues in recent quarters because of increased investments overseas.

Walmart shares ended the day almost 2 percent lower. With Thursday’s losses, the stock is higher more than 10 percent from a year ago, putting Walmart’s market capitalization to approximately $291.5 billion.

“We have momentum in the business as we execute our plan and benefit from a favorable economic environment in the US,” said chief executive Doug McMillon in a statement.

Walmart reported net income for the fiscal third quarter of $1.71 billion or 58 cents per share, compared with $1.75 billion, or 58 cents a share from a year ago.

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Not including one-time items, Walmart earned $1.08 per share, or 7 cents ahead of analysts’ expectations based on a survey by Refinitiv.

Revenue increased 1.4 percent to $124.89 billion from $123.18 billion a year ago, falling short of expectations for $12.55 billion. Excluding the effects from currency, revenue was $126.1 billion.

Sales at stores in the US open for at least one year were higher 3.4 percent, topping the growth of 3.1 percent that analysts had forecasted. Walmart said that traffic at stores was higher 1.2 percent during the quarter, with the average shopper’s ticket up 2.2 percent.

Chief financial officer Brett Biggs said that grocery helped drive those results, since Walmart now has a grocery pickup option at roughly 2,100 stores across the US and grocery delivery at  about 600 locations.

Online sales were higher 43 percent during the third quarter and Briggs said that company is still heading to meet its goal of 40 percent e-commerce sales growth for the whole year. A year ago, the digital sales increased 50 percent while the company was just only starting to squeeze benefits from its acquisition of Jet.com.

Meanwhile, concerns have been raised that Walmart’s figures won’t be as strong as the economy cools off. However, some analysts still view the company as a beneficiary, “independent of how the macroenvironment is.”

“We’re probably about six months away from a slower consumer spending environment, as the boost from the tax reform starts to fade,” said UBS analyst Michael Lasser. “And so there’s a move away from some of the retailers that were disproportionately benefitting from that, to more safe-haven defensive-type retailers like Walmart.”

Even though there are uncertainties around increasing interest rates and rising costs because of tariffs, Lasser said that “Walmart has a good plan” in place to work around them. That includes deploying robots and other technology in stores so that the company can save money and put resources toward more labor-intensive tasks.

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