Updated 4:07 p.m. ET Nov. 20
While Walmart Inc. executives are capable of the kind of corporate chest-pumping that Wall Street adores, they generally play the part of humble servants of the retail giant and are not given to superlatives.
But Walmart’s fashion business has the C-suite excited.
After beating third-quarter profit estimates, raising its outlook for the year and revealing a move to the Nasdaq stock exchange, executives hosted a call with stock analysts on Thursday, repeatedly hyping the fashion business.
Outgoing chief executive officer Doug McMillon said, “I’m excited about what we’re seeing with our fashion categories in Walmart U.S. in particular.”
Incoming CEO and chief of the U.S. namesake division John Furner said: “We are very encouraged by the fashion business. It grew over 5 percent in the quarter and we see more and more customers choosing Walmart for their source of fashion — and the unit growth across basics for kids, men’s, women’s was really consistent across the categories.”
And chief financial officer John David Rainey said, “Fashion in particular has been a bright spot with improving comp trends throughout this year.”
This counts as a lot of excitement for Walmart.
The spotlight on fashion comes at a time when the retailer is taking on a broader profile — squaring off much more against Amazon than Target Corp., department stores or specialty chains. Walmart’s move to jump to the tech-heavy Nasdaq from the New York Stock Exchange next month reflects this evolution.
Investors approved of the company’s direction and sent the company’s shares up 6.5 percent to close at $107.14, boosting Walmart’s market capitalization by more than $50 billion to $855 billion. That puts the company near its all-time high of $109.58, set last month.
Walmart is growing beyond its retail roots.
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Fashion is coming to the fore just as Walmart gets techier — and that’s not by accident.
Saks Fifth Avenue veteran Denise Incandela was hired in 2017 and is now executive vice president of Walmart U.S.’ apparel division. Designer-to-the-stars Brandon Maxwell joined in 2021 as creative director of the retailer’s Scoop and Free Assembly brands.
The internal mindset now is geared toward building big fashion brands and not just big item-driven businesses. There’s more excitement and pizzazz on the selling floor.
And the online marketplace, where the company provides a platform for third-party sellers to connect with customers, has also given the retailer a new angle on fashion.
That’s taking a page out of Amazon’s playbook and makes apparel an important front in the war between Amazon and Walmart.
Amazon is still easily ahead in fashion, however.
According to Wells Fargo analyst Ike Boruchow, the value of all the apparel and footwear sold on Amazon’s platform topped $67 billion last year — more than double the $32 billion Walmart was estimated to have sold.
But while Walmart’s marketplace is much smaller, it’s expanding quickly, with the company saying automotive, toys, electronics and apparel all grew by more than 40 percent last quarter.
Walmart has a long way to go before it’s once again the country’s largest apparel business, but it’s gaining with both the more affluent and shoppers who are pinching pennies.
From his perch in the CFO’s chair, Rainey said the company’s strong performance in apparel, with unit sales up over 5 percent in each month of the quarter, has benefited from broader trends.
“If you go back a year ago, [fashion] was an area that we were really pressured with,” Rainey said. “Walmart is doing the things that it can to influence this, but I think what’s happening here from a merchandise category mix is really more of a macro phenomenon than anything.”
But the company is keen to keep the momentum up, particularly online.
Walmart’s overall e-commerce growth has topped 20 percent for seven consecutive quarters.
McMillon told analysts: “We continue building towards an e-commerce experience that is one, more personalized and relevant; two, multimodal, meaning a voice, text, image and video experience that is more conversational.
“Interacting with our app will include improved imagery, short-form video, livestreaming and interaction with influencers,” the CEO said.
As Furner takes up the effort, he has plenty of resources at the ready.
Walmart’s third-quarter net earnings rose 34.2 percent to $6.1 billion while adjusted EPS came in at 62 cents, a couple cents ahead of the 60 cents that analysts forecast, according to Yahoo Finance. Revenues for the three months ended Oct. 31 advanced 5.8 percent to $179.5 billion — $4.3 billion more than analysts forecast.
Comparable sales in the U.S. discount division grew 4.5 percent on broad-based strength. Global e-commerce grew by 27 percent while the newish advertising business expanded by 53 percent.
“The business is stronger in terms of our ability to make it more convenient to shop with us. I think that’s been a big development,” McMillon told analysts. “We’re not just known for price, we’re known for more than that now. And the runway looks like a long one to me. I have a high degree of confidence in the potential.”
Wall Street seemed to as well.
Michael Lasser, an analyst at UBS, said the quarterly report “largely validated the bull case on the stock.”
“Walmart continues to prove that the attributes of its model are working regardless of the backdrop,” Lasser said. “Its scale, value-focused approach, and investments are all bearing fruit. Its performance gap vs. the rest of retail is likely to show further widening as the retail reporting season unfolds.”
