Walmart’s third-quarter earnings report highlights the importance of its e-commerce business, which has been instrumental in driving the company’s overall performance.
Walmart Inc. is set to release its third-quarter fiscal 2024 earnings on November 16, and all eyes are on the company’s e-commerce business. With e-commerce sales accounting for 15% of Walmart’s overall net sales in the second quarter, it is evident that this segment plays a crucial role in determining the company’s performance. In this article, we will take a closer look at Walmart’s e-commerce initiatives, partnerships, and innovations that have propelled its growth in the online retail space.
E-Commerce, a Key Driver:
Walmart has been actively expanding its e-commerce business and omnichannel capabilities. The company has made strategic acquisitions, formed alliances, and improved its delivery and payment systems. Initiatives such as Walmart GoLocal, Walmart Connect, Walmart Luminate, Walmart+, and Walmart Fulfillment Services have contributed to the company’s success in the e-commerce sector.
One of Walmart’s notable achievements is its majority stake in Flipkart, an Indian e-commerce giant. This investment has bolstered Walmart’s International segment and provided a strong foothold in the rapidly growing Indian market. Additionally, Walmart’s ownership of PhonePe, India’s digital transaction platform, further enhances its presence in the country.
Walmart has also been making significant efforts to expand in the online grocery space, which has been a major contributor to its e-commerce sales. Through partnerships, investments, and innovative delivery methods, Walmart has improved its delivery capabilities. Collaborations with Salesforce, investments in DroneUp, and a pilot program with Cruise for grocery delivery through self-driven all-electric cars have strengthened Walmart’s position in the market. The of Express Delivery and the acquisition of Parcel have further elevated the company’s delivery services. Moreover, Walmart’s store and curbside pickup options provide added convenience for customers.
As of the second quarter of fiscal 2024, Walmart U.S. had nearly 4,600 pickup locations and over 4,000 same-day delivery stores. In the same quarter, global e-commerce sales surged by 24%, driven by the strength of omnichannel initiatives such as pickup and delivery. U.S. e-commerce sales rose by 24%, with pickup and delivery services and advertising playing a significant role. The International segment experienced a 26% increase in e-commerce sales, primarily due to store-fulfilled orders. Sam’s Club, Walmart’s membership-only retail warehouse club, saw an 18% jump in e-commerce sales, driven by strong curbside performance.
The benefits of these initiatives are expected to have a positive impact on Walmart’s e-commerce sales, ultimately boosting its overall revenues in the third quarter.
Other Factors:
While Walmart’s robust comparable sales have been a driver of growth, the company has faced challenges in managing its SG&A (selling, general, and administrative) expenses. In the second quarter, these expenses increased year over year, resulting in a deleverage of 33 bps (basis points) as a percentage of sales. Increased variable pay expenses, costs related to tech investments, and elevated store remodel costs in the United States contributed to this increase. Walmart anticipates a year-over-year increase in variable pay expenses in the third quarter as well.
How Are Estimates Shaping Up?
Analysts expect Walmart to report third-quarter revenues of $159.4 million, reflecting a 4.3% increase from the previous year’s quarter. The consensus estimate for quarterly earnings stands at $1.51 per share, representing a 0.7% growth compared to the same quarter last year. It is worth noting that Walmart has a trailing four-quarter earnings surprise of 11.6%, on average.
Conclusion:
Walmart’s e-commerce business has emerged as a key driver of the company’s growth. Through strategic acquisitions, partnerships, and innovative initiatives, Walmart has strengthened its position in the online retail space. The company’s robust e-commerce sales, coupled with its omnichannel capabilities, have contributed significantly to its overall performance. As Walmart prepares to release its third-quarter earnings, the market eagerly awaits the results, which will provide further insights into the company’s e-commerce success and its impact on its financial performance.
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