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Why the Walmart U.S. Segment Continues to Shine

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Walmart U.S. marked improved traffic

The Walmart (WMT) U.S. segment once again posted healthy top-line growth despite a challenging retail environment and increased competitive activity, especially in the grocery space. 

The Walmart U.S. segment accounts for the significant portion of the company’s overall sales and profitability. It has marked its 12th consecutive quarter of positive comps, with traffic rising in the past 11 consecutive quarters.

During fiscal 2Q18,[1. fiscal 2Q18 ended July 31, 2017] the Walmart U.S. segment saw its sales rise 3.3% YoY (year-over-year) to $78.7 billion, driven by 1.8% increase in comps or comparable store sales. The segment’s comp traffic rose 1.3%, while the average ticket size inched up 0.5%.

The company’s management stated that Walmart U.S. saw positive comps across all of its store formats. Its digital business contributed 70 basis points to the comps growth with online grocery and store pickup services gaining traction.

In comparison, rival Target (TGT) also reported positive comps in fiscal 2Q17 due to improved store traffic and higher digital sales. Meanwhile, Costco (COST) continues to report strong comps growth with higher store traffic in the US (SPY).

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Sales by category

The Walmart U.S. segment’s grocery business marked low-single-digit comps growth as food categories reported their best quarterly comps in the past five years. Food and consumables saw increased traffic with strong unit growth.

The retail giant’s management noted that slight food inflation added 30 basis points to its comps growth. Walmart’s focus on fresh offerings through reduced supply-chain days and price investments are leading to increased traffic despite competition from Amazon (AMZN) and Aldi.

The Walmart U.S. segment’s Health and Wellness category registered a low-single-digit rise in comps, reflecting higher traffic and inflation in branded drugs. Its General Merchandise category also saw low-single-digit comps growth with improved traffic in the Hardlines and Home segment.

Outlook

Management expects the Walmart U.S. segment’s comps to improve in the range of 1.5%–2.0% in fiscal 3Q18. The company’s digital and in-store initiatives could boost the segment’s sales during the back-to-school shopping season.

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