Retail behemoth Walmart (NYSE:WMT) reported Q3 FY2024 results exceeding Wall Street analysts' expectations, with revenue up 5.2% year on year to $160.8 billion. Turning to EPS, Walmart made a non-GAAP profit of $1.53 per share, improving from its profit of $1.50 per share in the same quarter last year.

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"We had strong revenue growth across segments for the quarter, and we’re excited to get an early start to the holiday season. From a Thanksgiving meal that costs less than last year, to great prices on fashion, toys, electronics, and seasonal decorations, we’re here to help families from around the world make this a special time. Looking ahead, our inventory is in good shape, the teams are focused, and our associates are ready to serve our customers and members whenever and however they want to be served."

Known for its large-format Supercenters, Walmart (NYSE:WMT) is a retail pioneer that serves a budget-conscious consumer who is looking for a wide range of products under one roof.

Large-format Grocery & General Merchandise Retailer

Big-box retailers operate large stores that sell groceries and general merchandise at highly competitive prices. Because of their scale and resulting purchasing power, these big-box retailers–with annual sales in the tens to hundreds of billions of dollars–are able to get attractive volume discounts and sell at often the lowest prices. While e-commerce is a threat, these retailers have been able to weather the storm by either providing a unique in-store shopping experience or by reinvesting their hefty profits into omnichannel investments.

Sales Growth

Walmart is a behemoth in the consumer retail sector and benefits from economies of scale, an important advantage giving the business an edge in distribution and more negotiating power with suppliers.

As you can see below, the company's annualized revenue growth rate of 5.2% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was mediocre as its store count dropped, signaling that growth was driven by more sales at existing, established stores.

This quarter, Walmart reported solid year-on-year revenue growth of 5.2%, and its $160.8 billion in revenue outperformed Wall Street's estimates by 1.4%. Looking ahead, analysts expect sales to grow 2.5% over the next 12 months.

While most things went back to how they were before the pandemic, a few consumer habits fundamentally changed. One founder-led company is benefiting massively from this shift and is set to beat the market for years to come. The business has grown astonishingly fast, with 40%+ free cash flow margins, and its fundamentals are undoubtedly best-in-class. Still, its total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.

Number of Stores (approximate counts, WMT does not give exact numbers)

A retailer's store count often determines on how much revenue it can generate.

When a retailer like Walmart keeps its store footprint steady, it usually means that demand is stable and it's focused on improving operational efficiency to increase profitability. As of the most recently reported quarter, Walmart operated ~10,500 total retail locations, in line with its store count a year ago.

Taking a step back, the company has kept its physical footprint more or less flat over the last two years while other consumer retail businesses have opted for growth. A flat store base means that revenue growth must come from increased e-commerce sales or higher foot traffic and sales per customer at existing stores.

Same-Store Sales

Walmart's demand within its existing stores has generally risen over the last two years but lagged behind the broader consumer retail sector. On average, the company's same-store sales have grown by 6.4% year on year. Given its declining store count over the same period, this performance stems from higher e-commerce sales or increased foot traffic at existing stores, which is sometimes a side effect of reducing the total number of stores.

In the latest quarter, Walmart's same-store sales rose 4.9% year on year. This growth was a deceleration from the 8.2% year-on-year increase it posted 12 months ago, showing the business is still performing well but lost a bit of steam.

Key Takeaways from Walmart's Q3 Results

With a market capitalization of $457 billion, a $12.15 billion cash balance, and positive free cash flow over the last 12 months, we're confident that Walmart has the resources needed to pursue a high-growth business strategy.

We liked seeing revenue outperform Wall Street's estimates, driven by better-than-expected same-store sales growth. On the other hand, its full-year adjusted EPS forecast missed analysts' expectations. This was the major negative driving the stock down. Overall, this quarter's results seemed fairly positive and shareholders should feel optimistic. Investors were likely expecting more, however, and the stock is down 5.9% after reporting, trading at $159.7 per share.

So should you invest in Walmart right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

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The author has no position in any of the stocks mentioned in this report.