• Retail Dive

Walmart sales gains slow in Q3 but remain strong ahead of the holidays

By Ben Unglesbee

Published Nov. 17, 2020

Dive Brief:

  • Walmart posted another quarter of major growth as U.S. sales rose 6.2% year over year in the third quarter to $88.4 billion, and domestic comparable sales rose 6.4%.

  • E-commerce sales rose 79% in Q3 with "strong results across all channels," the company said in a press release. Executives said on an analyst call that operating losses in Walmart's e-commerce unit have shrunk significantly.

  • Sales at Sam's Club rose 8.3% to $15.8 billion, with comp sales up 11.1%. Walmart's total company revenue rose 5.2% during the quarter, to $134.7 billion.

Dive Insight:

Walmart has been one of the retailers to thrive in a retail environment challenged on several fronts by the pandemic. But nobody's path has been smooth through 2020, which has been defined by volatility and unpredictability even for those retailers that have remained open and grown throughout the COVID-19 crisis.

As just one example, CEO Doug McMillon pointed to an "unusual" and "soft" back-to-school season in Q3 as virtual school and other disruptions rattled a perennial late summer and fall sales event. That, and a lack of a second federal stimulus to help consumers weather the current recession, partly explain why Walmart's sales growth slowed compared to its banner Q2.

But the retailer's sales nevertheless represent a solid performance in a rapidly shifting operating environment. McMillon said that many trends, especially the shift to digital buying, "clicked to a fast forward" this year during the pandemic, and some trends have exceeded projections by two or three years.

The retailer's tickets show that the number of transactions has fallen more than 14%, though the average ticket value more than made up for the decline, with growth of 24%.

According to data from analytics firm Placer.ai, customers at Walmart have been spending more time and money at its stores even as visits decrease. Moreover, the gap between year-over-year visit numbers shrank in October compared to earlier in the pandemic.

"This indicates that Walmart could be already ... enjoying the value of an extended holiday season, where the brand looks to spread the holiday spirit over a longer period of time to offset the loss of Thanksgiving shopping," said Placer.ai Vice President of Marketing Ethan Chernofsky in a blog post.

As Walmart customers increase their spending and consolidate trips, it creates challenges for the retailer even as sales remain high. Neil Saunders, managing director with GlobalData Retail, said in emailed comments that his team thinks "Walmart is starting to miss out on some of the impulse purchases that come with a higher frequency of visits," especially in non-food areas.

Saunders also said that the re-opening of the economy, with consumers visiting a wider array of retailers, has also contributed to a slowing of sales growth.

Executives sounded an optimistic note headed into Q4 the holidays. Going into the season, the retailer is looking to its stores to provide an advantage. Walmart's massive store fleet is being put to use as hubs for curbside and store pickup — both expected to grow this year during the November sales holidays. McMillon said that some 2,500 stores are also fulfilling online orders, making stores logistics hubs as well.

Walmart also launched its new Walmart+ subscription service in time for the holiday season. Executives said they were excited by early results but did not share subscriber numbers. Saunders said that "[f]rom what we can establish, the Walmart+ membership scheme is off to a good start and should help the company in its quest to compete with Amazon."

Moody's retail analyst Charlie O'Shea called Walmart's Q3 performance "stellar," noting that operating income spiked 22% despite COVID-related costs (to the tune of $65 million in the quarter, according to executives).

"With Holiday in full-swing, we expect Walmart to continue its tradition of being one of the true pace-setters, and the efficiency with which it has integrated its two channels will serve it well as promotional activity kicks up," O'Shea said in emailed comments.

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