The AI-Powered Walmart Delivered another Strong Quarter
Walmart's performance captivated the Wall Street audience once again. The world's largest retailer employing over 2 million associates in more than 10,500 stores generated 169.6 billion of revenue from August to October, compared to 167.67 billion of average analyst projections. Its EPS (earnings per share) came out at $0.58 to beat consensus estimates of $0.53 as well. This allowed the stock to rise over 4.5% in the first hour of premarket trading on November 19 to reach a new absolute high just above $88 per share. Its low price policy concerning essential products plus online sales expansion and the AI features helped a lot amid softening demand from budget-conscious households. What is important for the market dynamics of Walmart is improving the retail giant's own forecast for EPS outlook to the range between $2.42 and $2.47 for fiscal year of 2025, above its previous $2.35 to $2.43 projections. Its CEOs anticipate overall sales growth of 4.8% to 5.1% in the next 12 months, with currency-adjusted operating income to add 8.5% to 9.25%, despite currency fluctuations reportedly made a $1.2 billion negative contribution to the recent quarter results. Advertising sales driven by marketplace sellers were up about 50%. Thus, we are keeping our $100+ target area for Walmart, also considering investment into U.S. retail segment leaders as a quasi-protective way of money allocation.
Walmart's domestic comparable sales, excluding the fuel small correction, was even stronger than we supposed to rise 5.5% against consensus annual pace at 3.8%. Revenue from Walmart Sam’s wholesale Club to enjoy the best perks in terms of premium quality, cheaper or free services like curb side pickup and exclusive savings for loyal customers (it costs $50/year or $110/year for a Plus membership) warmed up even better to grow by 7%, amid 4.22% projection on average by expert pools. In May, Walmart just opened its 48th Sam's club warehouse in China, and nearly 50,000 people visited the place on its opening day.
Doug McMillon, the current president of Walmart who actually began his career here in 1984 as an hourly associate to pick orders and unload trailers in a warehouse, freshly commented that the whole process of assembling and delivering grew faster to become more convenient for buyers. While speaking in August, he argued that Walmart is using data and large language models from others and building its own features to leverage generative AI tools designed to improve the customer, member and associate experience. He mentioned improving a product catalogue containing over 850 million pieces as a very simple example, which expands from just helping people to "find and buy what they're looking for" to "how we store inventory in the network" before picking up orders.
Without the use of generative AI, "this work would have required nearly 100 times the current head count to complete in the same amount of time", he added. The AI even shows higher quality images of product packages for the stores' personnel to make everybody quickly find necessary items. The AI-powered search on Walmart's mobile application and site increases sales by providing advice and ideas of what a customer may choose. The AI assistant may answer questions like "which TV is best for watching sports" or "what is the most popular choice for the party with children". The same AI assistant can also briefly summarize to give important answers to sellers in offline shops so that they may better help customers.
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