Walmart (WMT) stock has outperformed the broader market, soaring over 60% year-to-date. This strong performance reflects the retail giant’s solid financial results and continued market share gains. For the first half of 2024, Walmart reported a more than 5% increase in net sales and nearly 10% growth in adjusted operating income. This robust performance led the company to raise its full-year guidance, setting expectations even higher for the remainder of the year.
As Walmart prepares to report its Q3 fiscal 2025 results ahead of the opening bell this Tuesday, Nov. 19, let’s explore what to expect from Q3 and break down the key factors that could influence the stock’s future direction.
Q3 Expectations
Walmart is forecasting Q3 sales growth between 3.25% and 4.25%, with operating income expected to increase by 3% to 4.5%. Earnings per share (EPS) are predicted to range between $0.51 and $0.52.
Analysts, however, are slightly more optimistic. Their average EPS estimate of $0.53 reflects a modest 4% increase year-over-year.
Notably, Walmart has planned a significant portion of its expenses for Q3 and Q4, which could weigh on its earnings growth rate.
Walmart Has Multiple Growth Catalysts
Despite the short-term pressure on earnings, Walmart has multiple growth catalysts that could support its stock. The retailer continues to gain market share as its value proposition—offering low prices, a wide assortment of products, and convenience—resonates strongly with consumers. Thanks to this, Walmart consistently witnesses a steady increase in transaction counts and unit volumes, particularly in the U.S., where both Walmart and Sam’s Club have maintained steady comparable sales growth.
Besides pricing, Walmart’s private label products are another growth area. Walmart is seeing increased adoption of its new food brand, Bettergoods, and growing enthusiasm for its revamped fashion line, No Boundaries. The success of its private brands, like Member's Mark, is also noteworthy as they continue to expand in both digital and physical sales.
E-Commerce and Membership Growth
Walmart’s digital transformation is fueling its growth, with e-commerce sales rising 20% across segments and 21% overall. The company is seeing increased demand for its delivery and pick-up options, with delivery speed and accuracy continuing to improve. In the U.S., Walmart’s e-commerce sales grew by 22% in Q2, while active customers increased by 20%.
Internationally, Walmart is seeing similar success. For example, in China, Walmart increased the number of orders fulfilled within an hour by 28%, and in India, Flipkart’s grocery sales grew by over 50%. Meanwhile, membership trends remain strong, with Walmart+ membership income growing at double-digit rates and Sam’s Club setting new records for member counts and income. In China, Walmart’s Sam’s Club business grew membership income by 26%.
Marketplace Expansion and Advertising Growth
Walmart’s marketplace is another key driver of growth. In the U.S., marketplace sales grew 32% in Q2, with significant gains in fashion, toys, and home goods. Internationally, the company has expanded its marketplace offerings, increasing items and sellers in Mexico by 60% and launching cross-border trade in Chile.
Advertising is another bright spot for Walmart, with advertising sales growing 26%, including a 30% increase for Walmart Connect in the U.S.
Walmart’s ability to integrate advertising into its marketplace platform has significantly contributed to this growth, with sales from marketplace sellers up nearly 50%.
Supply Chain and Technology Investments
Walmart invests heavily in its supply chain and technology to support long-term growth. The company’s supply chain transformation is well underway, with automation significantly improving efficiency. Over 45% of Walmart’s e-commerce fulfillment center volume is now automated, and the company is seeing positive returns on these investments.
Walmart’s focus on automation and artificial intelligence (AI) is helping to improve customer, member, and associate experiences while optimizing operations.
Wall Street’s Optimistic View
As Walmart gears up to release its Q3 earnings, Wall Street remains bullish on its prospects. The stock currently holds a "Strong Buy" consensus rating, and analysts are optimistic that Walmart will continue to deliver solid results despite potential headwinds in the upcoming quarter.
In conclusion, Walmart’s impressive performance in 2024, highlighted by solid sales and operating income growth, has solidified investor confidence. While the company faces short-term pressures, such as planned expense increases in Q3, its long-term growth prospects remain robust. Walmart's expanding market share, successful private label products, e-commerce growth, membership growth, and investments in supply chain and technology all position the retailer for continued success.
