Walmart's Q3 revenue and profit both exceeded expectations, raising revenue guidance again, up nearly 4% in pre-market trading | Earnings report insights

In the third quarter, Walmart continued to achieve strong growth in revenue and profit, raising its full-year revenue guidance for the third time this year, expecting the holiday shopping season to maintain its growth momentum.

On the evening of November 19, American retail giant Walmart released its earnings report for the third quarter of fiscal year 2025 (calendar year 2024 third quarter) ending October 31.

1) Key Financial Data:

Revenue: Walmart's revenue for the third quarter was $169.59 billion, a year-on-year increase of 5.5%, compared to an estimate of $167.49 billion, with net sales increasing by 5.4% year-on-year to $168 billion.

Profit: Walmart's operating profit for the third quarter increased by 8.2% year-on-year to $6.7 billion, with net profit rising to $4.58 billion, adjusted earnings per share of $0.58, estimated at $0.53, a year-on-year increase of 13.7%.

Gross Margin: Driven by strong performance in the U.S. market, Walmart's overall gross margin increased by 21 percentage points year-on-year to 24.2% in the third quarter.

2) Key Business Revenue Data:

Walmart U.S.: Net sales for the third quarter were $114.9 billion, a year-on-year increase of 5%, with comparable sales (excluding fuel) growing by 5.3% year-on-year, and total revenue of $5.4 billion, a year-on-year increase of 9.1%. E-commerce sales grew by 22%, with gross margin and membership income expanding, improving the overall business mix.

Walmart International: Adjusted revenue for the third quarter increased by 16.7% year-on-year to $13 billion, with net sales (excluding fuel) increasing by 8% year-on-year to $30.3 billion. E-commerce channel sales grew by 43%, and advertising revenue increased by 50%.

Sam's Club: Revenue for the third quarter increased by 6.9% year-on-year to $6 billion, with net sales (excluding fuel) increasing by 3.9% year-on-year to $22.9 billion, and comparable sales (excluding fuel) growth rate improved from 3.8% in the same period last year to 7%.

3) Performance Guidance:

The full-year net sales growth expectation has been raised from 3.75%-4.75% to 4.8%-5.1%.

The full-year adjusted operating profit growth expectation has been raised from 6.5%-8% to 8.5%-9.25%.

The full-year adjusted EPS expectation has been raised from USD 2.35-2.43 to USD 2.42-2.47.

The financial report shows that compared to the same period last year, customers visited Walmart's U.S. stores and website more frequently and often spent more. Walmart's U.S. transaction volume increased by 3.1% year-on-year, and the average ticket price rose by 2.1%.

Walmart President and CEO Doug McMillon commented:

"Our quarterly performance was strong, continuing the momentum of growth... In-store sales in the U.S. grew, with store pickup accelerating, and the growth rate of store delivery was even faster."

After the financial report was released, Walmart's U.S. stock rose nearly 4% in pre-market trading.

High-Income Households Show Strong Spending Willingness, Grocery Categories Grow Steadily

The financial report indicates that the growth of Walmart's U.S. business is mainly driven by increased foot traffic and rising average ticket prices.

In terms of business segments, Walmart's U.S. e-commerce sales grew by 22%, thanks to store pickup and delivery services, while advertising from Walmart Connect and its online business also achieved a 26% year-on-year growth; membership revenue also saw double-digit growth.

By demographic, Walmart achieved growth across all product categories and income groups, with high-income households contributing the most to performance.

By category, in the third quarter, grocery sales, which account for about 60% of Walmart's total sales in the U.S., achieved mid-single-digit year-on-year growth, with the report stating that "food units reached their highest level in four years."

Additionally, sales of personal care and household cleaning products also increased. Due to the launch of new product lines like BetterGoods earlier this year, Walmart's private label penetration rate rose by 80 basis points. Driven by an increase in pharmacy prescriptions, Walmart's U.S. health and wellness business also saw a sales growth of one-tenth in the third quarter.

However, due to consumers' overall cautious attitude, sales of daily necessities remain weak, with sales growing at a low single-digit rate, but achieving year-on-year growth for two consecutive quarters. Walmart CFO John David Rainey stated that consumers will not abandon their cautious purchasing stance until greater discounts are introduced.

Value Strategy Remains a Key Advantage, Future Tariff Pressures May Push Up Product Prices

Walmart's excellent performance is mainly attributed to its price advantage.

Goldman Sachs analyst Kate McShane stated to the media before the earnings announcement that Walmart has a price advantage, with its average price for a "basket of groceries" being about 10% to 12% cheaper compared to its peers; LSEG consumer research director Jharonne Martis also mentioned that Walmart's low-price strategy has even "put significant competitive pressure on Amazon."

However, with Trump about to take office as President of the United States, Walmart's Chief Financial Officer Rainey pointed out that the policy of increasing tariffs could lead to price hikes at Walmart, but it is still uncertain which products might become more expensive.

Rainey also added that about two-thirds of the products sold by Walmart are manufactured, produced, or assembled in the United States, which reduces the tariff risk for this portion of goods. Meanwhile, like other retailers, Walmart has been working to diversify its imported products. Rainey stated:

"We have never considered raising prices; our slogan is 'Everyday Low Prices.' But for consumers, there may be instances of price increases."

Additionally, Walmart's revenue from membership models like Walmart and its advertising business Walmart Connect has also performed well.

In this quarter, driven by growth in store pickup delivery and market sales, Walmart's global e-commerce sales overall increased by 27%, with membership and other income rising by 16.1% year-on-year to $1.59 billion, and the advertising business grew by 26%.

Goldman's McShane analyzed:

"Investors have always recognized Walmart's pursuit of other sources of income... (they) believe these income sources are faster-growing and higher-margin businesses, which should bring better profitability to the company in the long run."