Walmart’s Strong Performance Driven by Grocery Business and Digital Expansion

In anticipation of releasing its third-quarter earnings on Tuesday, Walmart, the country’s largest retailer, is poised to report a robust performance. The company’s shares have experienced a significant uptick, rising by 60% this year, marking its best year since 1999. At that time, Walmart was focused on expanding its chain of superstores and establishing a substantial presence in international markets like Canada and Mexico.

Diya Iyer, an analyst at S&P Global Ratings, observed several factors contributing to Walmart’s enduring success over the past quarter-century. «They’re the largest grocer in America,» Iyer commented, noting that approximately 60% of Walmart’s business revenue stems from its grocery division. She attributed the company’s appeal to the enhancement of its delivery and curbside pickup services.

«And I think that is a lot about their own execution, actually, not just sort of natural need for cheaper groceries,» Iyer further elaborated. Meanwhile, Joe Feldman from Telsey Advisory Group pointed out that the economic climate, with its emphasis on value, also plays to Walmart’s advantage. «The consumer has money to spend and has shown resiliency all year, but they’ve definitely focused on value and basics and getting food on the table,» Feldman explained.

The synergy between groceries and other sales is apparent at Walmart. Customers who come in for groceries often end up purchasing items from other categories, like clothing or electronics. Feldman noted, «They’re seeing the customer on a regular weekly basis, and so, that is different from many others in retail that have fully discretionary assortments.»

An integral aspect of Walmart’s strategy, as highlighted by Sheraz Mian, director of research at Zacks Investment Research, is its competitive digital offerings. Mian remarked, «A digital package of services that is a worthy rival to Amazon,» mentioning tools like Walmart’s site, app, and annual membership that have attracted and retained customers.

Mian also remarked on the retailer’s resilience amidst economic challenges, «As the lower end of the income distribution has struggled, Walmart has been able to more than offset that by leveraging its extensive reach and attractive pricing models.»

Looking forward, Walmart’s fourth quarter is expected to continue this positive trend. Iyer observed that the holiday shopping season is shorter this year, prompting more consumers to shop online, a move that benefits Walmart’s burgeoning e-commerce business.