17 Nov

What’s behind Walmart’s US Segment Growth?

WRITTEN BY Amit Singh

Sales continued to rise

Walmart’s (WMT) US segment, which accounts for the majority of its sales and profitability, continued to shine in fiscal 3Q18. The US (SPY) segment marked 13 consecutive quarters of positive comps (comparables). Its traffic has risen in the past 12 quarters.

In fiscal 3Q18, the segment’s top line rose 4.3% YoY (year-over-year) to $77.7 billion, reflecting a 2.7% increase in comps. Comp traffic remained strong and rose 1.5%, while the average ticket size marked a growth of 1.2%, despite value pricing. In comparison, Target’s (TGT) traffic improved in fiscal 3Q17. However, its average ticket size fell marginally. Costco (COST) continues to impress with its stellar traffic and ticket size in the United States.

What’s behind Walmart’s US Segment Growth?

Walmart witnessed improved performance across all formats, with e-commerce generating significant growth. Its digital business contributed 80 basis points to comps growth. Its consumer-friendly offerings, including multichannel sales, online grocery, and store pickup services, remain popular among consumers and are driving its top-line growth. Comps also benefitted from hurricane-related sales.

Sales by category

Walmart’s comps for the US segment’s grocery business grew in the low single digits, driven by healthy growth in the food business. That marked its strongest comps in the past six years. Food and consumables witnessed improved traffic, driven by innovation and growth in private brands. The company’s value pricing, improved quality, and fresh offerings drove the category’s growth, despite increased competition from the expansion of Aldi, Lidl, and Amazon (AMZN).

The health and wellness category marked mid-single-digit comps growth, driven by increased traffic and inflation in branded drugs. The general merchandise category grew in the low single digits, driven by new products and growth in private brands. The category saw increased sales in shoes, ladies apparel, automotive, and toys.

Outlook

The company’s management expects the US segment’s comps to rise 1.5%–2% in fiscal 4Q18. Its e-commerce business is likely to drive the segment’s sales during the key holiday season.

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