Walmart (WMT 93.88, +4.05, +4.5%) is doing just fine in the face of heightened competition from Amazon.com (AMZN 1126.69), Target (TGT 54.16), and an assortment of other low-price retailers. That is the takeaway from its third quarter earnings report, which featured a positive comparable sales surprise and increased guidance for fiscal 2018.
The stock of the world's largest retailer has responded in kind to the encouraging results, up 4.5% in pre-market trading in a move that promises to lend support to the Dow Jones Industrial Average and the Consumer Staples Select Sector SPDR ETF (XLP 54.20).
For its fiscal third quarter, Walmart reported a 4.2% increase in total revenue of $123.2 billion, a 2.7% increase in Walmart U.S. comp sales, versus company guidance that called for an increase of 1.5% to 2.0%, and adjusted earnings per diluted share of $1.00, which exceeded analysts' average expectation.
Sam's Club comps were up 2.8%, as a 3.6% increase in traffic offset a 0.6% decrease in ticket. Walmart's guidance called for a comp sales increase between 1.0% and 1.5%.
Not surprisingly, Walmart's profit margins were pressured by the investments it is making in its stores, eCommerce platform, and people. Operating margins for the period decreased 46 basis points to 3.87%, yet investors appear enthused that the investments are paying off in the form of increased comparable sales.
Notably, the comparable sales increase for Walmart U.S., excluding fuel, was driven by a 1.5% increase in traffic and a 1.2% increase in ticket, indicating both visits and spending by its customers rose during the period.
There is no better indication than that to affirm that Walmart is battling successfully against Amazon.com.
Walmart added some fuel to the competitive fire with increased guidance for fiscal 2018. Adjusted earnings per share are now expected to be between $4.38 and $4.46, up from prior guidance of $4.30 to $4.40. In turn, the retailer is forecasting both Walmart U.S. and Sam's Club comps to be up 1.5% to 2.0%, excluding fuel.
Shares of WMT have been a stalwart this year, up 30% year-to-date at Wednesday's close. That return looks set to be extended today and understandably so.