Walmart’s (WMT) third quarter results and expectations for the remainder of the year underscored the retail giant’s proficiency at maintaining its strong value proposition against an environment of lingering inflationary pressures and increased import tariffs.
On the earnings call, Walmart’s (WMT) management emphasized that disciplined inventory and assortment management has helped soften the impact of pricing pressures — particularly tariffs — leaving the company facing less tariff-related cost pressure than initially expected.
And as the retail sector struggles to keep up with Amazon (AMZN), Walmart (WMT) is stepping up its efforts to expand its digital footprint by shortening delivery times, increasing merchandise selection, and a greater integration of artificial intelligence.
“Almost a third of Walmart’s business is digital,” CEO Doug McMillan said on the call, reflecting on the 27% growth in ecommerce and strategies to extend that growth.
Management reaffirmed its focus on delivering profit growth that outpaces sales. Fourth-quarter sales are projected to climb 4.8%–5.1%, with operating income expected to grow 4.8%–5.5%.
Full year earnings are expected to be between $2.58 and $2.63 per share while Q4 is targeted for a range of $0.67 and $0.72 per share versus consensus estimates of $2.61 and $0.73, respectively.
“Fourth quarter guidance suggests our expectation is for the remaing quarters to perform the same…the holidays are off to a pretty good start,” CFO John David Rainey said on the call, adding that the company is entering Q4 “with strong momentum, healthy inventory and a clear focus on our value proposition,” Rainey added.
After a brief retreat in early trading in reaction to the below consensus Q4 EPS outlook, Walmart (WMT) shares regained their upward momentum and continued to gain ground during the earnings call thanks to management’s confidence in Walmart’s (WMT) growth potential and commitment to returning excess capital to shareholders.
Accordingly, Walmart (WMT) shares opened more than 3% higher, setting the stock at a three-week high.
Analyst Reaction:
Evercore ISI: While not immune to the choppy consumer backdrop we believe that Walmart is striking the right balance between reinvesting for growth while driving productivity with higher margin ancillary revenue streams gaining scale to drive operating profit growth ahead of sales growth. Walmart appears better positioned than most retailers to navigate the choppy tariff and consumer backdrop, in our view, with trusted low price leadership amplified by rising technology acumen to aid the convenience element of the value proposition.
BMO: WMT reported another beat and raise quarter, with very consistent performance across the business and against elevated, potentially overly optimistic expectations. Keyecommerce, membership, and advertising performance remained robust and continuedto demonstrate WMT’s model works at scale.
J.P. Morgan: Net-net, certainly some hits to the print (US grocery, enterprise GM and SG&Adollars, cautious/prudent guidance), which against the backdrop of CEO DougMcMillon retiring might feel soft vs. the market. That said, we don’t see a lot ofchange from what WMT has been posting, though we all continue to wait for themargin inflection.
Jefferies: While shares are down premarket, fundamentals remain solid—buy on weakness as Walmart’s omni-channel strategy and margin expansion continue to outperform peers.