Walmart’s five-year earnings winning streak rolls on

The world’s largest retailer continues to shake off the impact of tariffs from the United States-China trade war.

Strong consumer spending boosted United States online and in-store sales for the world's largest retailer [File: Kamil Krzaczynski/Reuters]
Strong consumer spending boosted United States online and in-store sales for the world's largest retailer [File: Kamil Krzaczynski/Reuters]

Walmart Inc kept its five-year winning streak on Thursday, reporting better-than-expected comparable sales for the third quarter, raising its full-year outlook, and earning praise from United States President Donald Trump.

Buoyant spending by US consumers boosted in-store and online sales for the world’s largest retailer. Walmart also picked up market share in food and other groceries.

Trump seized upon the stellar performance as evidence that the US-China trade war is having little impact on consumers.

“Walmart announces great numbers. No impact from Tariffs (which are contributing $Billions to our Treasury)…,” Trump tweeted.

Walmart has now posted its 21st consecutive quarter of US growth – a track record unmatched by any other retail chain. Its shares rose 2.5 percent in early trading.

Consumer spending going into the crucial holiday season remains healthy, Walmart Chief Financial Officer Brett Biggs told Reuters news agency in an interview on Thursday. Retailers earn a sizeable chunk of their annual revenue during November and December.

“The consumer remains in pretty good shape, [the] employment situation is good, fuel prices are low … wage growth is pretty good,” he said.

Walmart has also managed to minimise the impact of Trump-imposed tariffs on imports from China, Biggs said, noting “I think we’ve muted the impact [of tariffs] pretty well up to this point.”

The retailer gets 56 percent of its revenue from food and grocery sales, which allows it to manage the pressure from tariffs better than many rivals, analysts said.

Earlier this week, Trump dangled the prospect of completing an initial trade deal with China “soon”, but offered no new details on negotiations.

In October, Walmart said its chief executive for US operations, Greg Foran, will leave the company and be replaced by the head of its Sam’s Club warehouse chain unit, John Furner.

The US business has “a lot of momentum”, Furner told reporters on Thursday. His priority is to maintain that pace until the end of the holiday season, he added.

The company is focused on spreading out sales during this year’s compressed holiday season, instead of focusing on a few big days, executives said. Online sales rose 41 percent higher than the previous quarter’s increase of 37 percent and were greater than the company’s expectation of 35 percent.

Operating income continued to remain under pressure and fell 5.4 percent to $4.7bn as a result of ongoing investments in its e-commerce business including faster delivery.

Walmart’s online expansion has come at a cost to profitability, and losses at the US e-commerce business could rise to about $1.7bn this year from $1.4bn in 2018, according to estimates from Morgan Stanley.

Walmart’s US e-commerce chief, Marc Lore, said improving operating profitability is a key area of focus for the company.

Sales at US stores open at least a year rose 3.2 percent, excluding fuel, in the quarter that ended October 31. Analysts estimated growth of 2.9 percent, according to International Brokers Estimate System data from Refinitiv.

Adjusted earnings per share increased to $1.16 per share, beating expectations of $1.09 per share.

Walmart forecast that its earnings per share, factoring in the effect of its acquisition of Indian e-commerce retailer Flipkart, to increase “slightly” from a year ago.

Total revenue rose 2.5 percent to $128bn.

Source: Reuters

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