Strong past performance
Walmart’s (WMT) US sales have continued to grow at a healthy rate despite the segment facing tough competition from the expansion of Amazon (AMZN) in the grocery space and Target (TGT) in the digital space. Notably, Walmart has managed to improve its comps in the US for the past 17 consecutive quarters. Meanwhile, traffic increased in the past 16 quarters, which is impressive.
During the last reported quarter, Walmart’s US segment net sales grew by 3.7%, reflecting 3.4% growth in comps. Moreover, on a two-year stacked basis, its US comps increased by 6.1%. The growth was primarily driven by the expansion of its digital business, which is contributing meaningfully to comps growth.
By product category, comps at its grocery business are witnessing stellar growth. Management acknowledged that on a two-year stacked basis, its US grocery comps recorded the best growth in the past nine years during the third quarter.
As for the fourth quarter, we expect Walmart’s US sales to sustain momentum driven by the rise in comps. We believe Walmart’s convenient and money-saving offerings will continue to drive traffic, and in turn, its comps. Analysts remain upbeat and expect the segment to continue to grow sales and report better margins in coming quarters. Management expects its US comps to grow by at least 3.0% in fiscal 2019. However, increased competition and rivals expanding their online offerings could continue to hurt the company.