Walmart’s Q3 2018 Results – Comments

I found various notable items in Walmart’s Q3 2018 management call transcript (pdf) dated November 16, 2017.  (as well, there is Walmart’s press release of the Q3 results and related presentation materials)

I view Walmart’s results and comments as particularly noteworthy given their retail prominence and focus on low prices.  I have previously commented on their quarterly management call comments; these previous posts are found under the “paycheck to paycheck” tag.

Here are various excerpts that I find most notable:

comments from Doug McMillon, President and CEO, page 4, wrt Walmart U.S.: 

We had a strong quarter with comp-sales growth of 2.7 percent and
comp traffic growth of 1.5 percent. While we recognize that there are some
incremental hurricane-related sales in these numbers, our core business is
performing well.

comments from Doug McMillon, President and CEO, page 4, wrt Walmart U.S.: 

Walmart U.S. eCommerce sales were up 50 percent this quarter, with
the majority of the increase through Existing customers have
become advocates for popular initiatives like online grocery and free twoday
shipping, and as a result, new customers, suppliers and partnerships
are coming to Walmart. The expanded assortment on has
also contributed to growth. Over the past year, we’ve tripled the number of
items on to reach more than 70 million SKUs today. As you
heard last month, Marc’s team is making progress on hiring additional
category specialists focused on improving the customer experience and our
positioning with the top one million eCommerce items. The recent
agreement with Lord and Taylor is a great example of how we will be
creating specialty experiences that complement what we offer and serve
customers with the brands they want. We’re making good progress
attracting premium brands to the site such as KitchenAid and Bose.

comments from Brett Biggs, EVP & CFO, page 7:

We expect top line growth going forward to be led more by comp
sales and eCommerce with less emphasis on new units in the U.S. We
have good sales momentum and cost transformation is gaining traction.
This gives us confidence in our ability to operate with discipline and
leverage expenses. In terms of capital allocation, we’re prioritizing
eCommerce, technology, supply chain and store remodels over new stores
and clubs, which we believe will contribute to long-term value creation for
shareholders. We’re excited about the future of Walmart.

comments from Brett Biggs, EVP & CFO, page 9:

Walmart U.S. eCommerce continued its strong performance with net
sales growth of 50 percent. We began to lap the acquisition of
mid-quarter, which impacted our overall growth., including
online grocery, once again led the way and was responsible for the majority
of the growth in the period. Throughout this year we’ve talked a lot about
the speed at which we’re moving, and we continued that progress in the
third quarter. For example, we launched new partnerships with Google and
August Home – these are capital-light initiatives that expand convenience
for customers by enabling hands free voice shopping and unattended
delivery in the home. We also acquired Parcel, a technology-based, sameday,
last-mile delivery company focused on customers in New York City.

comments from Brett Biggs, EVP & CFO, page 10, wrt Walmart U.S.:  

Walmart U.S. had a strong quarter with comp sales growth of 2.7
percent led by a traffic increase of 1.5 percent. While difficult to quantify
precisely, we estimate hurricane-related impacts benefited comps by 30 to
50 basis points. On a two-year stacked basis, comp sales were up 3.9
percent and comp traffic increased 2.2 percent. This is the strongest
quarterly and two-year stacked comp performance in more than eight
years. The food business continued to accelerate with sales, traffic and
unit growth across categories. In fact, food categories delivered the
strongest quarterly comp sales performance in almost six years. Market
inflation was around or slightly less than what we saw in the second
quarter. All formats had positive comps and eCommerce contributed
approximately 80 basis points to the segment.

Gross margin rate declined 36 basis points in the quarter. The
margin rate decreased in part due to the continued execution of our price
investment strategy and the mix effects from our growing eCommerce
business. In addition, we estimate that hurricane-related impacts were
about one-third of the overall decline.

Operating expenses as a percentage of net sales decreased 10 basis
points, with stores leveraging at a higher level than that. The U.S. team
has made great progress while maintaining high customer service levels,
as associates are more efficient with improved technology, training and


The Special Note summarizes my overall thoughts about our economic situation

SPX at 2564.62 as this post is written