Walmart has reported its fifth consecutive quarter of positive comparable store sales growth, a sign that its US business is well and truly back on track. How has the world’s biggest retailer achieved this?

Walmart’s US business reported Q3 like-for-likes up 1.7% excluding fuel and including Sam’s Club. Although positive, this still represents a slight deceleration in growth and is indicative of the underlying pressures facing US consumers. Walmart has indeed made huge strides in lowering prices and improving its price image among core budget-conscious shoppers; therefore a slowdown in comp growth is probably what’s happening across the board in US retail as the sector heads into the all-important Christmas trading period.

Overall, sales at its core Walmart US division rose 3.6% to $66.1 billion while operating income increased 4.5% to $4.8 billion. Whereas this year has been purely about fixing the US business, 2013 will be about sustaining positive momentum and driving digital growth. Recent initiatives regarding the latter include Same-Day Delivery and the launch of Goodies, an online grocery subscription service.

Contrary to popular belief, Walmart’s best line of defence is its physical store base. If they are to have any chance of beating Amazon, they’ll need to leverage their 10,000+ stores around the globe. Same-day delivery attempts to address this, using their US stores as mini distribution centers, but it will be a financial and logistical nightmare to roll out in a meaningful way. Instead, expect further developments in mobile in 2013.

Walmart International to take over Carrefour?

International sales increased 2.4% to $33.2 billion during the quarter while operating income rose 4.8% to $1.5 billion. As a standalone retailer, we are expecting Walmart International to overtake Carrefour as the world’s second largest retailer this year - due to a combination of Walmart’s growth and Carrefour’s divestments. While international remains one of three key growth drivers (the other two being smaller formats and ecommerce), Walmart has been handed a reality check recently and has recognised that topline growth internationally is no longer a given.

As such, they are taking a pause in some of their most important international markets – Mexico, Brazil and China – in order to reassess their channel strategy and improve pricing and profitability issues. Like many foreign retailers, Walmart has been guilty of land-grabbing in the pursuit of fast growth. We are expecting their international strategy to shift from aggressive store openings to more strategic site selection, as well as a renewed focus on driving productivity of existing stores. Quality now takes precedence over quantity.

At the same time, we have to wonder whether a market like China or Brazil really needs as many new hypermarkets today as had been built in developed markets over the past 50 years. Although there is still plenty of physical space available, there will be less of a need to expand with big-box formats given the projected growth in ecommerce in those two markets in particular.

Rather than replicating growth patterns in developed markets which has now left many of the multinationals with a glut of below-optimum stores, Walmart would be better off to approach such emerging economies with a cautious but solid multi-channel strategy. As such, they are aiming to grow global online sales to $9 billion by next year, with a particular focus on Brazil, China, the US and UK.

Walmart’s results show us that the world’s largest and most influential retailer is back on track. International will be key going forward, but we can’t ignore the growth opportunities in the US. Not only is it the foundation of Walmart’s business but in fact we are expecting Walmart to generate an additional $55 billion in US sales over the next five years – far more than any overseas market.