Why Is Walmart Outperforming Expectations Despite Tariff Pressures?

In the quarter ending October 31 (the third quarter of Walmart’s fiscal 2026), the company made consolidated revenue of US$179.5 billion, an increase of 5.8 per cent year-over-year (6 per cent adjusted for currency fluctuation). Gross margin was flat at 24.2 per cent, and net after tax profit was US$6.1 billion, up 29.1 per cent year-on-year. For the first nine months of the financial year, the company’s revenues have risen by 4.4 per cent to US$517.5 billion, and net profit by 21.4 per cent to US$14.7 billion.

Driving some of the revenue growth was, as usual, global e-commerce, which in the third quarter soared by 27 per cent as delivery times further accelerated and the marketplace business expanded to complement Walmart’s own massive assortment. Membership income grew 16.7 per cent across the enterprise, driven by growth in Sam’s Club membership in China. Advertising revenue grew by 53 per cent. Membership and advertising income are now so important that they contribute about one-third of Walmart’s adjusted operating income. They are now the icing on the company’s income cake, led by Walmart Connect in the US and Flipkart in India.

Walmart US

Walmart US, which excludes domestic Sam’s Clubs, generated revenues of US$120.7 billion, an increase of 5.1 per cent and accounted for more than 67 per cent of total company revenues. Comparable-store sales for Walmart US increased 4.5 per cent, excluding the volatile fuel category. Transaction counts and average transaction values both increased. Leading categories were groceries, health and wellness (up in the double digits on a comparable-store basis, thanks primarily to pharmacy prescriptions), and general merchandise (fashion, home and auto care), which is continuing to recover from a somewhat weak first quarter. General merchandise has now ceased to be deflationary, and prices grew by 1.7 per cent year-on-year as the impact of tariffs began to work its way through the assortment. Even so, the tariff effect has, so far, at least been a non-event relative to expectations earlier in the year. Incoming CEO John Furner told investors on November 20, “In terms of the impact of tariffs, certainly, I think we have seen less impact than what we thought we would have expected early in the year.”

US e-commerce grew by 28 per cent, with store fulfilment driving more rapid delivery times. Approximately one-third of store-fulfilled deliveries were made in under three hours. The company noted that this was the seventh consecutive quarter with e-commerce growth beating 20 per cent. The marketplace business is growing rapidly, too. AI is assisting the company in identifying gaps in its assortment, and the marketplace is plugging them while helping expand its customer base.

“If you look on a category-by-category basis, there are places in our marketplace business like automotive, toys, electronics, apparel that are all growing north of 40 per cent year-on-year,” John David Rainey, the CFO, told investors.

“And so, it really shows that customers are coming to us with this broader assortment, and it’s allowing us to cater to a broader set of customers than we have historically.”

For Sam’s Club in the US, net sales were up 3.1 per cent to US$23.6 billion, with comps up 3.8 per cent excluding fuel. “For Sam’s membership, we see good growth in member accounts, renewal rates, plus member penetration,” outgoing CEO Doug McMillon said.

International generates double-digit sales growth

Sales for Walmart International, which includes international Sam’s Clubs, rose 10.8 per cent (11.4 per cent on a constant currency basis) to US$33.5 billion, accounting for 17.7 per cent of total company sales. China, Flipkart and Walmex were again the growth leaders. Membership income rose by 34 per cent year-on-year. E-commerce sales went up by 26 per cent.

Flipkart’s Big Billion Days in India were a roaring success. CEO of Walmart International, Kathryn McLay, said the event took in US$1 billion on the first day and 700 orders per second in the first hour.

Walmart’s e-commerce business in China is up more than 20 per cent

China remains a focus, and here, Sam’s Club and e-commerce (up 32 per cent on a constant currency basis) are driving revenue growth. Year-on-year sales in China increased by 21.8 per cent, with support from eight new Sam’s Clubs opened over the past 12 months.

Doug McMillon said 80 per cent of e-commerce orders in China were delivered in less than one hour in the third quarter. He is bullish about prospects in China. “In October, I got to visit three Chinese cities,” he said. “In Hefei, a city of about 10 million people, we visited a relatively new Sam’s Club that was outstanding. We now have 60 Sam’s Clubs in the country and a healthy pipeline of new clubs coming. China is more advanced in terms of digital retail than anywhere we operate, and there’s always a lot to learn that helps to inform what we do around the world.”

The low-income demographic in the US is a concern

Despite the consistency of Walmart’s overall performance month to month and quarter to quarter, a concerning issue was the softness at the low-income end of its customer base. CFO Rainey observed that the wage growth asymmetry across the low-, middle-, and high-income demographics was something Walmart was closely watching. “The disparity in wage growth between those cohorts was as large as it’s been in almost a decade”, he told investors.

Walmart’s guidance for fiscal-year sales and earnings was upgraded without any particular change to the optimistic outlook for the holiday season. After that, the company will say goodbye to CEO McMillon, who will step down at the end of the fiscal year on January 31. His successor, John Furner, started with Walmart as an associate in a Walmart garden centre back in 1993 and has worked his way up through the company. This is consistent with Walmart’s longstanding philosophy of promotion from within its own ranks. Like Furner, Doug McMillon also started his Walmart career as a store associate. The company culture hasn’t changed, and Furner will offer the kind of continuity that keeps investors calm.

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