In Walmart’s bid to take on Amazon, the world’s largest retailer once again showed it's willing to spend and sacrifice profit margin for market share gains and other potential competitive advantages.
Walmart on Thursday reported a better-than-expected U.S. comparable sales gain of 3.4% in the quarter that ended October 31 and said it gained market share in categories including food, consumables and “many areas” of general merchandise. On a two-year stacked basis, those sales rose 6.1%, the first time in over 10 years that Walmart said it's seen such a scorecard.
While higher store traffic, driven by demand for fresh food, and a higher average transaction amount contributed to the sales growth, e-commerce also played a critical role. Walmart's U.S. e-commerce sales surged 43%, contributing about 1.4 percentage points to last quarter’s results.
But those gains have come at a cost. Walmart U.S.'s third-quarter gross margin rate narrowed, hurt primarily by its pricing strategy, higher transportation expenses and the increasing mix of e-commerce growth, the company said. Year to date, the company’s total capital spending has increased slightly to $7 billion while year-to-date operating income has declined 0.5% to $15.9 billion.